Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO: KRS 13B, 45A.245, 61.878(1)(c), 176.090-176.110,
176.130-176.220
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
176.140 requires the cabinet to establish
administrative regulations in order to determine the eligibility of bidders for
construction contracts with the Department of Highways. This administrative
regulation establishes the requirements for an applicant to obtain a
certificate of eligibility with the cabinet. This administrative regulation
also establishes the hearing procedures for a contract claims dispute.
Section 1. Definitions.
(1) "Cabinet" means the Transportation
Cabinet.
(2) "Contract" means a
competitively bid contract between the contractor and the department pursuant
to KRS Chapter 45A and 176.090 through 176.110.
(3) "Contractor" means the person,
corporation, partnership, or joint venture that enters into a contract with the
department for highway maintenance or construction.
(4) "Maximum eligibility amount" means the
maximum amount of uncompleted prime contract work authorized at one (1)
time.
Section 2.
Certificate of Eligibility.
(1)
(a) A contractor bidding on a construction or
maintenance project, or accepting a subcontract on a construction or
maintenance project of the department, shall be prequalified and possess a
certificate of eligibility issued by the department to bid on construction
projects.
(b) The certificate shall
state the maximum eligibility amount and types of work for which the contractor
shall be qualified.
1. The department may, for
reasons of practicality, waive the requirements established in subsection
(1)(a) and (b) on a project not specifically involving the construction or
maintenance of a public road in connection with the letting of a contract if
the requirement is not mandated by
KRS
176.130.
2. The waiver shall be included in the notice
to contractors and the bid proposal for the project.
(2) The Commissioner of Highways
shall appoint a Construction Prequalification Committee composed of department
employees to review each application and make a recommendation to the State
Highway Engineer concerning the eligibility of a contractor to bid on a
department construction or maintenance contract.
Section 3. Application for Certificate of
Eligibility.
(1) A contractor desiring to
procure a certificate shall submit a completed Application for Certificate of
Eligibility, TC 14-1, notarized by a notary who is not an officer of the
company, to the Division of Construction Procurement. The applicant shall
provide:
(a) Information regarding the
applicant's ability to perform the types of work for which eligibility is
requested;
(b) Construction
experience resumes of the applicant's principal officers and key
personnel;
(c) A description of the
applicant's plant and equipment;
(d) Financial statements prepared as of the
close of the previous fiscal year for an established company, or to reflect the
current financial status of a newly established contractor applicant;
and
(e) A certificate of authority
if required by
KRS
176.150(4).
(2)
(a) An applicant desiring eligibility in
excess of $1,000,000 shall submit financial statements presented in accordance
with generally accepted accounting principles and audited by a certified public
accounting firm.
(b) The audit
shall be performed in accordance with generally accepted auditing
standards.
(c) The applicant's
financial statements shall include supplemental financial information if
requested by the department.
(d)
The financial statements for an applicant desiring eligibility of $1,000,000 or
less shall be accompanied by a review report issued by a certified public
accounting firm or a compilation report or balance sheet issued by a certified
public accounting firm or an accountant.
(3)
(a)
Pursuant to
KRS
61.878(1)(c), the department
shall not make the application information required in this section available
to the public.
(b) Pursuant to
KRS
176.210, the department may make lists of
qualified bidders public.
Section 4. Method of Computing Maximum
Eligibility Amount.
(1)
(a) The allowable current net assets as
determined from the financial statements, plus the cash surrender value, less
loans, of life insurance on which the applicant is the beneficiary, excluding
policies with other beneficiaries, shall be multiplied by a factor of twelve
(12) to establish the net current assets factor.
(b) The book value of owned equipment shall
be multiplied by a factor of six (6) to establish the equipment
factor.
(c) The equipment factor
shall be added to the net current assets factor to determine the maximum
capacity factor of the contractor.
(2) The contractor's percentage rating shall
be established by the department by evaluating the contractor's organization
and experience, plant and equipment, and prior construction performance in
accordance with the maximum percentages established in paragraphs (a) through
(c) of this subsection.
(a) Organization and
experience shall be twenty (20) percent.
(b) Plant and equipment shall be thirty (30)
percent.
(c) Performance shall be
fifty (50) percent.
(3)
(a) The maximum eligibility amount shall be
determined by multiplying the contractor's percentage rating and the maximum
capacity factor. The maximum capacity factor shall not exceed $1,000,000 if
unaudited financials have been submitted.
(b) A contractor's current eligibility amount
shall be the net difference between the contractor's maximum eligibility amount
as shown on the certificate of eligibility issued by the department and the
total value of uncompleted prime contract work charged to the contractor,
regardless of the location and with whom the contractor is
contracted.
Section
5. Issuance of Certificate of Eligibility.
(1)
(a) The
Construction Prequalification Committee shall review each application for a
certificate of eligibility and make a recommendation of eligibility to the
State Highway Engineer.
(b) The
State Highway Engineer shall issue a determination of eligibility, based on
KRS
176.130 through
176.220
and this administrative regulation, within thirty (30) calendar days after
receipt of the application unless the application is deferred as established in
Section 6(3) of this administrative regulation.
(c) Upon receiving a separate written request
from a contractor not prequalified with the department indicating the
contractor's intent to bid on a specific federal-aid project that has been
advertised for a bid opening within the thirty (30) day period, the department
shall review the application and make a determination of eligibility, based on
KRS
176.130 through
176.220
and this administrative regulation, within fifteen (15) calendar
days.
(2) A certificate
of eligibility shall terminate 120 calendar days after the end of the
applicant's fiscal year unless the certificate is suspended or revoked prior to
that time.
(a) An applicant shall file a new
application pursuant to Section 3 of this administrative regulation within
ninety (90) calendar days after the end of the applicant's fiscal
year.
(b) The department shall
review the application and approve or disapprove the issuance of a new
certificate of eligibility within thirty (30) calendar days of the date of
receipt by the department.
(3) The certificate of eligibility in effect
as of the bid opening date shall constitute the basis for determining the
eligibility of a bidder.
(4) An
applicant may, in regard to the department's decision on its application:
(a) Request reconsideration of the
department's decision pursuant to Section 6 of this administrative regulation;
or
(b) Appeal the department's
decision pursuant to Section 9 of this administrative regulation.
Section 6.
Reconsideration of Decisions.
(1)
(a)
1. An
applicant may request reconsideration of a decision of the Construction
Prequali-fication Committee if the applicant is denied a certificate of
eligibility or disagrees with the maximum eligibility amount or the types of
work established in its certificate of eligibility.
2. An applicant may request reconsideration
of a department decision to suspend or revoke the certificate of eligibility or
to reduce the maximum eligibility amount.
(b) A request for reconsideration shall be
submitted in writing to the department within ten (10) calendar days of the
applicant's receipt of the notice of the department's action.
(c) A request for reconsideration shall state
the basis of the request and be supported by information and evidence that
indicates why a certificate of eligibility should be issued or why the
certificate of eligibility should be amended.
(d) The Construction Prequalification
Committee shall review the request and may contact the applicant for
clarification or expansion of the submitted information. The committee shall
make a recommendation to the State Highway Engineer.
(e) The Department of Highways shall notify
the applicant of the determination within thirty (30) calendar days after
receipt of the request for reconsideration.
(f) If the Department of Highways does not
concur with the reconsideration request of the applicant, the applicant shall
be notified of his or her right to an administrative hearing pursuant to
Section 9 of this administrative regulation.
(2)
(a) An
applicant denied a certificate of eligibility may submit a new application for
reconsideration.
(b) The department
shall consider the new application and notify the applicant of the action taken
within thirty (30) calendar days after receipt of the application.
(3)
(a) An application that has been deferred by
the department until the applicant settles an outstanding debt to the
Commonwealth, completes a project, or satisfies prior concerns about work
performance on a project shall remain in the possession of the department until
the reason for deferral is resolved.
(b)
1. An
applicant shall be notified of a deferral within ten (10) calendar days after
action is taken by the department to defer the application.
2. The applicant shall be notified of his or
her right to an administrative hearing regarding the deferral.
(4)
(a) An interim application may be submitted
if there has been a substantial increase in the net current assets of the
applicant and the applicant wishes to apply for an increase in the maximum
eligibility shown on the certificate of eligibility.
(b) The interim application shall contain a
financial statement certified in the same manner as the statements submitted by
the applicant at the close of the previous fiscal year.
(c) The department shall review the interim
application and notify the applicant of the department's determination within
thirty (30) calendar days after receipt of the application.
(5)
(a) A certificate holder, upon receipt of a
certified mail request from the department, shall submit an interim financial
statement or current information relating to the applicant's organization,
equipment, and work status.
(b) The
information requested shall be submitted within thirty (30) calendar days after
receipt of the request. Failure to provide the information requested shall
constitute a basis for the suspension or revocation of a certificate of
eligibility.
(6) An
applicant may request an administrative hearing if the applicant is denied a
certificate of eligibility, the application is deferred, or the applicant
disagrees with the maximum eligibility amount or the types of work listed in
the certificate of eligibility.
(7)
To request an administrative hearing, an applicant shall notify the department
in writing within ten (10) calendar days after receipt of the denial or
certificate of eligibility.
Section
7. Revocation.
(1) A certificate
of eligibility shall be subject to suspension, revocation, or a reduction in
the maximum eligibility amount upon receipt of information or evidence that a
holder of a certificate of eligibility has failed to perform satisfactorily by
failure to comply with the laws, administrative regulations, or specifications
applicable to a contract or subcontract.
(2) A notice to the certificate holder
stating the grounds on which the action is proposed, shall be sent by certified
mail.
(3) A request for
reconsideration pursuant to Section 6 of this administrative regulation, or a
request for an administrative hearing, shall be submitted by the certificate
holder in writing within ten (10) calendar days of the receipt of notice of a
decision by the cabinet. If a written request is not received within ten (10)
calendar days, the proposed action shall become final.
Section 8. Administrative Claims Process.
(1) The cabinet shall not consider a claim
for extra work as established in the edition of the Standard Specifications for
Road and Bridge Construction applicable to the contract between the cabinet and
the contractor unless the contractor has submitted a completed Notice of
Potential Claim, TC 63-77, to the engineer before beginning the disputed
work.
(2) A notice of claim against
the cabinet for delay shall be submitted in writing to the engineer on a
completed Notice of Potential Claim, TC 63-77 within ten (10) calendar days of
the date the contractor knew or should have known of the existence of the claim
as based on daily records, contractor records, or applicable correspondence. A
notice of claim presented to the cabinet by the contractor after ten (10)
calendar days shall not be considered for payment by the cabinet.
(3) After receipt of Notice of Potential
Claim, TC 63-77, the cabinet shall respond to the contractor with
Acknowledgement of Notice of Potential Claim, TC 63-78.
(4) For claims involving extra work, the
contractor shall submit to the engineer a summary of the force account forms
that identify each operation affected, and the specific locations where work is
affected, no later than fourteen (14) calendar days after filing the Notice of
Potential Claim TC 63-77, and on a weekly basis thereafter.
(5) If the contractor's records indicate
costs that are greater than those on record with the cabinet, the engineer
shall notify the contractor in writing.
(a) A
contractor shall respond to the engineer within three (3) working days if he or
she disagrees with the findings of the engineer.
(b) If the contractor fails to respond, the
records of the cabinet shall control.
(6) For claims involving delay, the
contractor shall submit the following in writing no later then fourteen (14)
calendar days after filing the Notice of Potential Claim, TC 63-77, and on a
weekly basis thereafter:
(a) Information
regarding the potential effect to the schedule caused by the delay;
(b) Identification of the operations that
have been, or will be delayed;
(c)
The possible mitigating actions and the additional costs or time to implement
the mitigating actions;
(d) An
explanation of how the department's act or omission delayed the operation and
an estimation of the amount of time necessary to complete the project;
and
(e) An itemization of the extra
costs incurred including:
1. How the extra
costs relate to the delay and how they were calculated and measured;
2. An identification of the project employees
for whom the costs are being compiled; and
3. An identification of the contractor's
equipment by manufacturer and the numbers of the items of equipment for which
costs have been compiled.
(7) A contractor may request additional time
or a different submittal schedule, such as biweekly or monthly, by submitting a
written request to the engineer. Approval or denial of the request shall be
issued by the engineer within seven (7) calendar days of receipt of the
request.
(8)
(a) If the contractor submits the claim to
the engineer, the engineer, in consultation with the district transportation
engineering branch manager, shall attempt to resolve the dispute with the
contractor within sixty (60) calendar days of the date of receipt of the
submitted claim from the contractor
(b) If the claim is not resolved by the
engineer, then the claim shall be submitted to the director, Division of
Construction, who shall have ninety (90) calendar days from the date of
submission to make the final determination.
(c) If the matter is not resolved by the
engineer and the contractor and prior to making a final determination on the
matter, the director, Division of Construction shall convene an informal
settlement conference with the contractor for the purpose of either settling
the dispute or identifying the issues that need resolution. If the settlement
conference is unsuccessful, the director, Division of Construction, shall
notify the contractor in writing of the cabinet's decision regarding the
contractor's claim.
(d) If the
engineer or the director, Division of Construction, fails to render a decision
within the time limits established in this section, the inaction shall be
deemed a denial of the claim by the cabinet, and the contractor may proceed
with the administrative hearing process pursuant to Section 9 of this
administrative regulation. If a decision is not rendered within the time limits
established in paragraphs (a) and (b) of this subsection, the cabinet shall
bear all costs associated with the hearing officer.
(9) The contractor shall request an
administrative hearing pursuant to KRS Chapter 13B within thirty (30) calendar
days of the date of the notification of the decision by the cabinet.
(10)
(a)
Upon the agreement in writing of both parties, the parties may engage in formal
nonbinding mediation of the dispute with a mediator agreeable to both
parties.
(b) The parties
participating in the mediation shall each pay one-half (1/2) of the costs
associated with the mediator.
(11) If mediation is agreed upon by the
parties, all time limits related to the continuing administrative process shall
be stayed until either the cabinet or the contractor submits written notice to
the other that they are terminating the mediation process. The time limits
previously stayed shall commence to run upon the date of the written
notice.
Section 9.
Hearing Procedure.
(1) A request for an
administrative hearing pursuant to the provisions of this administrative
regulation shall be in writing and mailed to the Kentucky Transportation
Cabinet, State Highway Engineer, Department of Highways, 200 Mero Street,
Frankfort, Kentucky 40622.
(2) A
written request for an administrative hearing shall be submitted to the State
Highway Engineer within thirty (30) calendar days of the date of the decision
by the director, Division of Construction.
(3) A request for an administrative hearing
that is not submitted timely to the cabinet shall be denied, and the decision
by the director, Division of Construction, shall stand.
(4) The secretary of the Transportation
Cabinet, after receiving the report and recommendation of the hearing examiner,
may accept the report and recommendation in its entirety, or reject or modify
the findings and recommendations of the hearing examiner as established in a
final order pursuant to KRS Chapter 13B.
(5) The contractor shall be notified by final
order of the secretary's decision.
(6) The contractor shall have appeal rights
pursuant to KRS Chapter 13B.
(7)
The contractor shall reimburse the cabinet one-half (1/2) of the expenses of
the hearing officer within thirty (30) calendar days after the date of the
entry of the final order by the Secretary of Transportation. If a contractor
fails to pay its portion of the hearing officer expenses, the cabinet shall
withhold an amount due to the contractor from a current or future
project.
(8) Pursuant to
KRS
45A.245, a contractor may forego the KRS
Chapter 13B hearing and file a lawsuit in Frankfort, Kentucky in the Franklin
County Circuit Court.
Section
10. Material Incorporated by Reference.
(1) The following material is incorporated by
reference:
(a) "Application for Certificate of
Eligibility", TC 14-1, February, 2017;
(b) "Notice of Potential Claim", TC 63-77,
November, 2018;
(c)
"Acknowledgement of Notice of Potential Claim", TC 63-78, November,
2018;
(d) "Standard Specifications
for Road and Bridge Construction", March 1, 2004;
(e) "Standard Specification for Road and
Bridge Construction", December 14, 2008;
(f) "Standard Specification for Road and
Bridge Construction", June 15, 2012;
(g) "Standard Specifications for Road and
Bridge Construction, January 1, 2019.
(2) This material may be inspected, copied,
or obtained, subject to applicable copyright law, at the Kentucky
Transportation Cabinet, Department of Highways, Division of Construction
Procurement, 200 Mero Street, Frankfort, Kentucky 40622. The office hours are 8
a.m. to 4:30 p.m. on weekdays. The office telephone number is (502)
564-3500.
STATUTORY AUTHORITY:
KRS
174.080,
176.140(2)