By: Jennifer R. Budd and George E. Pallas

A bill allowing the New Jersey Turnpike Authority (“NJTA”) to enter into design-build contracts has been introduced in the New Jersey Assembly (A1561) and the Senate (S1211). The NJTA is the entity charged with maintaining and implementing capital improvements on the New Jersey Turnpike and the Garden State Parkway. The bill, if passed, would give the NJTA the discretion to administer any project through a design-build contract, rather than through the current design-bid-build method of procurement.

How It Will Work

According to the bill, if the NJTA decides to bid a project as a design-build, the NJTA must adhere to a two-phase procedure for awarding the contract. Under the first phase, the NJTA would qualify interested bidders, which may include joint ventures, by the issuance of a Request for Qualification. The Request for Qualification will list information such as the minimum qualifications needed by the design-build entity, a scope of work statement, the maximum time allowed for the project and the NJTA’s estimated costs of design and construction. Of the phase one bidders that respond to the Request for Qualification, the NJTA must select at least two but no more than five bidders to participate in a second phase Request for Proposal (“RFP”) solicitation.

For the second phase, the NJTA will issue an RFP to the remaining bidders. In response, those contractors will submit a technical proposal and a sealed price bid. The technical proposal will be reviewed by a technical review committee, given a score, and that score shall be submitted to the NJTA and made public. The NJTA will set a minimum technical proposal score, and any proposal that does not meet the minimum shall be rejected. Once the NJTA has determined which proposals have met the minimum score, the price bids will be opened publically, and the NJTA must award the project to the design-build entity with the lowest bid.

The Bill Has Some Traction

During the 2010-2011 term, legislators introduced a similar bill, and the Assembly Transportation, Public Work and Independent Authorities Committee unanimously passed it with amendments. The NJTA bill is very similar to the version passed by the Committee last year, which may be suggestive of the legislature’s belief that design-build bidding will be more efficient and cost effective for the NJTA.

Implications On Contractors

If passed, this bill could have widespread effects on highway and road contractors in New Jersey. Due to the high level of engineering, design and technical skill required to compete in price, and the cost of retaining such professional services, many small and mid-sized contractors could be squeezed out of the competition. On the other hand, larger contractors may enjoy the independence that often accompanies design-build construction since the contractors will have the benefit of design input from project inception.

Notwithstanding the additional independence, contractors should keep in mind that design-build projects are fraught with higher risk because design-builders are responsible for all phases of the project and any liability stemming from it. Additionally, unlike in design-bid-build construction where the contractor can look to the owner or the designer to share the costs from unanticipated circumstances, a design-build contractor is less likely to benefit from such cost-sharing.

Jennifer R. Budd is an Associate at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

George E. Pallas is the Treasurer of the Firm as well as a Shareholder and member of the Board of Directors. He is also a Partner with the Firm’s Construction Group.

Daniel E. Fierstein, an Associate with the Firm contributed to this post.