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Public Improvement - Alternative Contracting Method

What is a Public Improvement Alternative Contracting Method?

Public Improvement Alternative Contracting is a procurement method an agency may choose to conduct when it has sought and received an exemption for a contract or a class of public improvement contracts. This contracting method deviates from the competitive bidding process, and if the contract type is not specified in statute, state law requires that an agency seek an exemption from the DAS Director prior to conducting a procurement using this method. 

Additionally, state law creates exceptions or exemptions from Public Improvement Competitive Bidding for certain public improvement projects. For example, an Energy Savings Performance Contract (ESPC) is an exception to the competitive bidding method and an agency using an ESPC is not required to submit findings or request an exemption from competitive bidding requirements.

For this alternative procurement method, DAS State Procurement Services on behalf of an agency, or an agency with delegated procurement authority, collectively termed, a procuring agency, conducts a procurement process that is consistent with the type of contract it seeks to establish. 

The Public Improvement Alternative Contracting method enables an agency to use innovative techniques and processes to procure public improvement projects. Examples of contracts that use this method include:
  • Design-Build
  • Construction Manager/General Contractor (CM/GC)
  • Energy Savings Performance Contracts
  • Performance Contracting
  • Cost Plus Time Contracting
  • Qualifications Plus Project Approach Contracting
Alternative methods provide options for unique, complex or schedule-critical projects. An agency that uses an alternative method is afforded flexibility in evaluating proposals and in contract negotiations, which can result in substantial cost savings and other substantial benefits to the state.

When to Use a Public Improvement Alternative Contracting Method

An agency may use the Public Improvement Alternative Contracting method if it is procuring:
  • An Energy Savings Performance Contract.
  • An individual contract that has been exempted from the competitive bidding process.
  • A class of contracts that has been exempted from the competitive bidding process.
The Public Improvement Alternative Contracting method may also be used for other applicable statutory exceptions (refer to ORS 279C.335(1)).

How to Process a Solicitation Using a Public Improvement Alternative Contracting Method

Prior to each budget period, an agency must submit a list of every public improvement contract that it plans to fund in the upcoming budget period to the Commissioner of the Bureau of Labor and Industries.

The agency must identify each improvement by name and estimate the total on-site construction costs. The agency must also indicate whether it intends to perform the construction through a private contractor. If the project is estimated to cost more than $125,000 and the agency intends to perform the work using its own equipment and personnel, the agency must also confirm that its decision is the least cost.

Resource: Use BOLI's Planned Public Improvement Summary Form (WH-118) to submit planned public improvement projects.


A procuring agency must use a process that comprises the following 12 tasks to conduct a solicitation through the Public Improvement Alternative Contracting method:

If a procuring agency is performing an ESPC procurement, or is using the alternative method to execute a procurement for other applicable statutory exceptions, it is not required to request an exemption and may skip tasks 1-3 above.

A procuring agency must request an exemption from competitive bidding for a public improvement contract if the procurement does not meet applicable exception or exemption provisions of state law. The exemption request, submitted to the State Chief Procurement Officer (State CPO), as the delegate of the DAS Director, must be supported by findings that justify the request. DAS approval of an exemption is based upon representations made in the findings as well as the accuracy of the findings. 

A finding must identify the project and contract with defining characteristics that include the location, project description, anticipated time period, anticipated contract value and other significant factors. Generally, findings must address the following eight areas at a minimum:
  1. Operational, budget and financial data
  2. Public benefits
  3. Value engineering
  4. Specialized expertise required
  5. Public safety
  6. Market conditions
  7. Technical complexity
  8. Funding sources
Statute requires the following items to be described in an exemption request:
  • How the exemption will be unlikely to encourage favoritism or substantially diminish competition. The agency should include specifics on:
    • The solicitation process it will use.
    • Plans for formal advertisement of the procurement and the disclosure of the planned alternative contracting method.
    • Evaluation criteria and process.
    • Ability of a supplier to submit a protest.
  • How the exemption will likely result in substantial cost savings and other substantial benefits. In addition to an analysis or reasonable forecast of cost savings, the agency should include specifics on:
    • How many suppliers are available to bid.
    • Construction budget and the projected operating costs.
    • Public benefits that may result from granting the exemption.
    • Whether value engineering techniques may decrease the overall cost.
    • Cost and availability of specialized expertise.
    • Any likely increases in public safety.
  • Other considerations include whether granting the exemption:
    • May reduce risks to the agency or the public that are related to the public improvement.
    • Will affect the sources of funding for the public improvement.
    • Will strengthen the agency’s ability to control the impact that market conditions may have on the cost of and time necessary to complete the public improvement.
    • Will strengthen the agency’s ability to address the size and technical complexity of the public improvement.
An agency’s exemption request must specify whether it employs, or has retained under contract, agency or state personnel with expertise and experience in alternative contracting methods. Applicable experience includes providing consulting and legal services in the procurement, award, negotiation, and administration of the public improvement contract.

If an agency has not used the specific alternative contracting method and intends to use the project to determine whether using the alternative contracting method results in cost savings, they may choose to identify the project as a pilot project in lieu of developing findings on cost savings and seek an exemption.

A procuring agency must submit draft findings to the State Chief Procurement Officer (State CPO) and to the Attorney General’s Office for review and comment prior to advertising the required public hearings.After comments have been received and incorporated, and provided the State CPO has granted consent to proceed, the procuring agency may post the public notice and conduct the required hearing.

If a procuring agency receives State CPO consent to proceed, the agency must provide notice and host a hearing to receive public comment on the draft findings. The procuring agency must publish notice of the public hearing in a minimum of one trade newspaper of general statewide circulation for a minimum of 14 days prior to the hearing. The notice must state that the public hearing is for the purpose of taking comments on the draft findings for an exemption from the competitive bidding requirement. At the time of the notice, copies of the draft findings must be made available to the public. 

If circumstances require prompt action, the hearing notification may be published simultaneously with the solicitation. However, in this situation, responses to the solicitation must be due at least five days after the hearing and approval of findings.

The State CPO must consider testimony received at the public hearing and incorporated in the findings. The State CPO will issue an exemption order that contains the findings of fact and conclusion of law.The exemption order will either deny or grant approval, including any applicable conditions, of the requested exemption from competitive bidding requirements and the use of an alternative contracting method.

A solicitation document for public improvements includes the RFP and its attachments, a sample contract, addenda, exhibits and supplemental information to be posted through OregonBuys. An RFP must include the following information according to Oregon state law and administrative rule:
A designation for or description of the public improvement project.
The location of the office where the solicitation document may be reviewed.
The date that prequalification applications must be filed and the class or classes of work for which proposers must be prequalified if prequalification is a requirement.
  • Time, date and place of solicitation closing.
  • The form and instructions for submitting a proposal including any other special information, for example, electronic means of submission.
  • The name and title of the individual authorized to receive proposals.
  • A statement that each proposer must identify whether the proposer is a resident proposer.
  • A statement that the procuring agency may cancel the procurement or reject any or all proposals.
  • A statement that the procuring agency may not receive or consider a proposal for a public improvement contract unless the proposer is licensed by the Construction Contractors Board or the State Landscape Contractors Board.
  • Whether a contractor or a subcontractor under the contract must be licensed under ORS 468A.720 regarding asbestos abatement projects.
  • Contractor's certification of nondiscrimination in obtaining required subcontractors.
  • Contracts that will be for a Public Works project require a statement that no proposal will be received or considered by the agency unless the proposal contains a statement by the proposer that it agrees to be bound by and will comply with the provisions of applicable state or federal law.
In addition, the procuring agency must include the following details related to its procurement:
  • Evaluation processes, including any discussions that may be required and parameters for establishing a competitive range, if used.
  • Evaluation criteria and relative weight of each criteria.
  • Negotiation processes, including identifying items that will be considered for negotiation within the solicitation document.
  • Description of the award process, including details of how the procuring agency will award to multiple proposers, if applicable.
Resource: DAS State Procurement Services maintains forms, guidelines, and templates for agency use when developing public improvement solicitation documents. Reference these documents and confer with DAS State Procurement Services and the Attorney Generals Office, as applicable, prior to issuing a solicitation for a public improvement project.
​

Requests for qualifications

A procuring agency may use a two-step process, issuing a Request for Qualifications (RFQ) prior to issuing an RFP in an effort to obtain information to aid in preparing and distributing an RFP. Distributing the RFP is limited to the proposers identified as most qualified through the RFQ process. 

When using an RFQ as the first step, a procuring agency must advertise and provide public notice of the RFQ in the same manner as described below for an RFP. The RFQ document must include:
  • A statement that the RFP will only be provided to proposers determined to be qualified in the RFQ process.
  • A protest provision that allows a written protest within seven days after issuing the notice of the competitive range, unless a different protest period is specified.
No further advertisement or public notice is required when providing the RFP to qualified proposers in the second step of the two-step process.

After the procuring agency obtains internal and state-level approvals, the agency must advertise the opportunity through a public notice posted on OregonBuys. This informs potential respondents of the procurement opportunity and strengthens competition.

To further promote the procurement opportunity and foster competition, a procuring agency may supplement the public notice through additional means. An agency may use mail, newspaper or the agency’s website for this purpose, however, the information provided must be limited to directing potential respondents to the official notice on OregonBuys.

Public improvement contracts with an estimated cost exceeding $125,000 also require publication of an advertisement of the procurement opportunity in at least one trade newspaper of general statewide circulation in addition to the electronic posting on OregonBuys.

All public notices must contain the following information:
  • Where, when, how, and for how long the solicitation may be obtained.
  • A general description of the products or services to be acquired.
  • The date a potential respondent must file an application for prequalification, if prequalification is a requirement, and the class of products or services for which suppliers must be prequalified.
  • The office where contract terms, conditions and specifications may be reviewed if unable to access the official notice on OregonBuys.
  • The name, title and address of the individual authorized to receive solicitation responses.
  • The time and date by which the solicitation must be received.
  • Any other information deemed appropriate.
​Official notice of the solicitation must appear on OregonBuys for a minimum of seven days prior to the solicitation closing date. 

If the procuring agency publishes additional advertisements, the solicitation closing date must be a minimum of five days after the date of the last publication of the advertisement.

After posting notice, the procuring agency must manage the solicitation until proposals have been received. Solicitation management includes:
  • Facilitating pre-proposal conferences (if provided through the solicitation).
  • Receiving and responding to potential proposers’ written inquiries regarding the solicitation.
  • Processing solicitation addenda, as required.
Prior to solicitation closing, the procuring agency may conduct a pre-proposal conference to explain the procurement requirements, obtain information or conduct site inspections. A procuring agency must include a notice of pre-proposal conferences in the solicitation document. Oral responses to questions and other statements made during the pre-proposal conference are not binding on the state unless confirmed in writing through an addendum to the solicitation posted through OregonBuys.

After the official public notice of the solicitation and before the award of a contract, any communication between the procuring agency and potential proposers must occur within the context of the solicitation only. This communication can only occur during the scheduled question and answer time frame allowed by the solicitation as it relates to supplier inquiries related to terms and conditions, specifications, addenda or other related matters. During this time frame, telephone conversations and meetings with potential proposers must be documented in the procurement file.

If potential proposers submit written questions regarding a solicitation, the procuring agency should post the questions and answers on OregonBuys. A record of all material communications regarding the solicitation by potential proposers must be included as part of the procurement file.

If required, the procuring agency must issue an addendum to the RFP that describes any changes to the RFP resulting from the inquiries. An addendum is typically used to communicate material changes to the RFP, correct minor defects, and provide information or clarification to potential proposers. 

The procuring agency must post official notice of an addendum to the RFP through OregonBuys. When considering an addendum to an RFP, the procuring agency should consider the impact to the potential proposers and determine if additional time should be given for submission ofproposals. Provided there is no extenuating public interest to retain the solicitation closing date, the procuring agency should not issue an addendum less than 72 hours before the solicitation closing unless the addendum also extends the solicitation closing date.

A procuring agency may cancel a solicitation if it is in the public interest to do so. However, the agency must provide proper notice of the cancelation through OregonBuys.

The procuring agency must date and time stamp, but not open, any proposal submitted prior to closing. Proposals must be stored in a secure place until the closing time and date listed in the RFP. 

After the closing date and time for the RFP, the procuring agency conducts a public opening for all proposals received, and reads aloud and records the names of all proposers in a proposal register that must be posted to OregonBuys. 

All proposals are withheld from public inspection until after award of the contract. At a public opening, the procuring agency must only disclose the names of the proposers and must open proposals in a manner to avoid disclosing contents to competing proposers.

Any proposals arriving after the official due date and time are considered late and may be retained by the state, returned to the proposer at its expense, or destroyed.

The procuring agency must conduct a review of all proposals to determine their responsiveness to the RFP’s mandatory requirements, including compliance with the RFP’s minimum qualifications and minimum submission requirements. Following this review, the evaluation team, comprising representatives selected by the procuring agency, must independently review the responsive proposals and evaluate each according to the criteria established in the RFP. 

At any time prior to award, the procuring agency must determine responsibility of the apparent successful proposer and may reject a proposer found to be not responsible. Refer to Evaluation Strategy for more information on the evaluation process.

During the evaluation, the evaluation team may seek clarifications from a proposer. Requests for clarification must be sent formally to the proposer through the procurement professional. Clarifications must be submitted in writing and include the proposer’s signature. Clarifications become part of the proposal submission.

After the evaluation team has completed evaluation of all proposals, the procurement professional will compile the evaluation scores, rank the proposers based on the evaluation team’s scoring and determine the competitive range. The procuring agency must provide written notice to all proposers of the proposers selected to be in the competitive range and provide 10 days for any proposer not in the competitive range to protest the evaluation and determination of the competitive range.

After the protest period has passed and the competitive range has been established, the procuring agency may either enter into discussions with proposers in the competitive range (refer to task #9 below "Plan and execute negotiations" for instructions on how to conduct Discussions) or may issue a notice of intent to award (refer to task #11 below "Issue notice of intent to award and post award"​) for the highest ranked proposer.

Evaluation criteria

The evaluation criteria that may be used in selecting and awarding a contract is determined by the type of alternative contract method conducted by a procuring agency. In general, criteria in addition to price may be considered in the selection process, but only as described in the solicitation document.

If a procuring agency received an exemption to conduct a procurement for a basic negotiated construction contract, where the sole reason for an RFP is to consider factors other than price, those factors may consist of:
  • Firm and personnel experience on similar projects.
  • Adequacy of equipment and physical plant.
  • Sources of supply.
  • Availability of key personnel.
  • Financial capacity.
  • Past performance.
  • Safety records, project understanding.
  • Proposed methods of construction.Proposed milestone dates.
  • References, past performance.
  • Related matters that could affect the cost or quality of the work.
If an agency is procuring a Construction Manager/General Contractor (CM/GC) contract, the procuring agency may (in addition to the above criteria) also include in its evaluation criteria consideration of the contractor’s ability to:
  • Respond to the technical complexity or unique character of the project.
  • Analyze and propose solutions or approaches to complex project problems.
  • Analyze and propose value engineering options.
  • Analyze and propose energy efficiency measures or alternative energy options.
  • Coordinate multiple disciplines on the project.
  • Effectively use the time available to commence and complete the improvement.
For a Design/Build procurement, in addition to any of the above criteria, the procuring agency may also include in its evaluation criteria consideration of the contractor’s ability to:
  • Design professional qualifications.
  • Specialized experience.
  • Preliminary design submittals.
  • Technical merit.
  • Design-builder team experience.
Finally, for ESPC procurements, in addition to any of the above criteria, the procuring agency may also include in its evaluation criteria:
  • Sample technical energy audits from similar projects.
  • Sample measurement and verification (M&V) reports.
  • Financial statements and related information of the Energy Service Company (ESCO) for a time period established in the RFP.
  • Financial statements and related information of joint venturers comprising the ESCO.
  • The ESCO's capabilities and experience in performing energy baseline studies for facilities (independently or in cooperation with an independent third-party energy baseline consultant).
  • Past performance of the ESCO in meeting energy guarantee contract levels.
  • The specific person that will provide the energy savings guarantee to be offered by the ESCO.
  • The ESCO's management plan for the project.
  • Information on the specific methods, techniques and equipment that the ESCO will use in the performance of the work under the ESPC.The ESCO's team members and consultants to be assigned to the project.
  • The ESCO's experience in the ESPC field.
  • The ESCO's experience acting as the prime contractor on previous ESPC projects (as opposed to a sub-contractor or consultant to a prime ESCO).
  • The ESCO's supplier and product neutrality related to the development of energy conservation measures.
  • The ESCO's project history related to removal from an ESPC project or the inability or unwillingness of the ESCO to complete an ESPC project.
  • The ESCO's M&V capabilities and experience (independently or in cooperation with an independent third-party M&V consultant).
  • The ESCO's ability to explain the unique risks associated with ESPC projects and the assignment of risk in the particular project between the agency and the ESCO.
  • The ESCO's equipment performance guarantee policies and procedures.
  • The ESCO's energy savings and cost savings guarantee policies and procedures.
  • The ESCO's project cost guarantee policies and procedures.The ESCO's pricing methodologies.
  • The price that the ESCO will charge for the technical energy audit phase of the work.
  • The ESCO's fee structure for all phases of the ESPC.

Once the competitive range has been established, the procuring agency may use one or both of the following processes, described following:
  • Conduct discussions with proposers in the competitive range.
  • Conduct negotiations with highest ranked proposer.

Conduct discussions

Prior to more formal negotiations with the highest ranked proposer, the procuring agency may enter into broader discussions with some or all of the proposers in the competitive range as may be required to achieve the best value proposal to the agency. A procuring agency may stop discussion with any proposer at any time in the process as required.

Discussion may begin with, and must end with a request for revised proposals from proposers in the competitive range. If the evaluation team determines it would benefit from revised proposals, the procuring agency may seek revised proposals from proposers in the competitive range to request additional information, to address issues or concerns they have with a proposal or to clarify aspects of proposals. If the evaluation team requests revised proposals, it must reevaluate the revised proposals according to the criteria described in the RFP. 

The procuring agency may then conduct discussions with proposers in the competitive range as needed. In conducting discussions, the procuring agency must treat all proposers fairly showing no favoritism to any one proposer, may not discuss or disclose the contents of a competitor’s proposal with another proposer, and may not suggest or direct action on specific revisions that a proposer should make to its proposal.

After completing discussions with all proposers, the procuring agency must send a notice to each proposer in the competitive range with a specified date and time for submission of a revised proposal. No further discussions may be held once the procuring agency provides the proposers with a formal request for revised proposals. 

Upon receipt of the revised proposals, the evaluation team must evaluate the revised proposals based upon the evaluation criteria described in the RFP, and rank the revised proposals based on the evaluation team scoring. The procuring agency may conduct discussions with and accept only one revised proposal from each proposer in the competitive range unless otherwise stated in the RFP.

Conduct negotiations

The procuring agency may negotiate contract terms with the intended awardee either following the initial evaluation or after performing discussions, whichever is most advantageous to the agency. Terms and conditions of the potential contract may be negotiated to the extent allowed by the RFP provided that the general work scope remains the same and that the competition is not reduced due to material changes to the requirements stated in the RFP. 

Prior to initiating negotiations, the procuring agency must establish a negotiating team and should prepare a summary of points to cover in the negotiations. During the negotiations the team should document the outcome of negotiations for each point. Verbatim records of the negotiations are not required.

The procuring agency may terminate negotiations with a proposer and enter into negotiations with the next highest-ranking proposer. The procuring agency may take this action after a time period established in the RFP if it believes the proposer is not negotiating in good faith or if the procuring agency has determined that further negotiations will not result in the parties agreeing to the terms and conditions of a contract in a timely manner.

Terms that may be negotiated consist of details of:
  • Contract performance.
  • Methods of construction.
  • Schedule.
  • Assignment of risk in specified areas.
  • Cost.
  • Other matters that could affect the cost or quality of the work.
For the CM/GC (and Design/Build) methods, negotiable terms may also include:
  • The specific scope of pre-construction services.
  • The general contractor work.
  • Any early work and other construction work to be performed by the CM/GC.
In ESPC contracting, negotiable terms may also include:
  • The scope of preliminary design of ECMs, which the parties will evaluate during the technical energy audit phase of the work.
  • The scope of personal services and work to be performed by the ESCO during the project development plan phase of the work.
  • The detailed provisions of the Energy Savings Guarantee to be provided by the ESCO and scope of work.
  • Methodologies and compensation terms and conditions during the design and construction phase and M&V phase of the work.
A procuring agency may conduct serial negotiations with the highest-ranked eligible proposer or may conduct simultaneous negotiations with all eligible proposers. A procuring agency may negotiate any element called out as negotiable in the RFP, including:
  • Proposed statement of work.
  • Proposed price.
  • Other terms and conditions authorized for negotiation in the RFP.
A procuring agency must not accept alternative terms and conditions that are not reasonably related to those authorized for negotiation in the RFP.

For multiple award contracts, the procuring agency may enter into contracts with different terms and conditions with each contractor to the extent those terms and conditions are within the scope of the RFP and do not materially conflict with the applicable contractual terms and conditions.

Once the procuring agency selects the responsible proposer that submitted the proposal offering the best value to the state, the agency must document the award determination and file it in the procurement file. At a minimum, documentation of an award determination for an RFP must include:
  • The complete evaluation of the proposals.
  • Written justification for any rejection of higher scoring proposals.
  • Written documentation of any discussions, clarification, negotiations or BAFO.
  • Written documentation of any other procedures used to select the anticipated awardee.
In addition to these required elements, the procuring agency should also document any other relevant information supporting its award decision.

After documenting the award determination, the procuring agency should prepare for contract award. Prior to awarding a contract, the procuring agency must send to all proposers a written notice of the intent to award and post a notice of intent to award on OregonBuys at least seven days prior to the award of a contract to allow for protests. 

After the notice of intent to award, the procurement files must be made available according to law, except where statute requires the procuring agency to make information in the procurement files available before any notice of intent to award (refer to the Public Records Law) or that the procuring agency may withhold from disclosure to the public because the materials are deemed exempt or conditionally exempt from disclosure (refer to ORS 192.501-502).

After the intent to award protest period, and as required by the RFP, the procuring agency must provide the successful proposer a contract, signed purchase order, price agreement, or other contract documents, as applicable. 

Unless exempted, public improvement contracts with an estimated value of more than $100,000 require the successful proposer to execute and deliver a performance bond and a payment bond. The successful proposer must promptly execute the provided contract and complete any actions necessary to complete the contract, including posting performance security, submitting proof of insurance (when the RFP requires it) and agreeing to perform the scope of work and meet the performance standards stated in the RFP. 

If the successful proposer fails to promptly and properly execute the contract, deliver the performance bond, the payment bond or the proof of insurance (if required), the proposal security must be forfeited as liquidated damages.

The procuring agency must ensure that all required contract clauses are included in the final contract. In addition, the type of alternative contract method executed will determine specific additional contract provisions that must be included. A procuring agency should reference administrative rules related to public contracts for construction services when drafting a contract to ensure it meets the specific requirements for contracting.
  1. CM/GC Contracts (refer to OAR 137-049-0690).
  2. Design-Build Contracts (refer to OAR 137-049-0670).
  3. ESPC Contracts (refer to OAR 137-049-0680).

Post Project Evaluation

Once a contract is completed and final payment is made for a public improvement contract exceeding $100,000 where competitive bidding was not used, a procuring agency must complete and submit an evaluation of the public improvement contract. The evaluation helps determine whether the use of an Alternative Contracting Method was in the agency’s best interests. 

Evaluations must include:
  • Actual costs compared to original estimates.
  • The guaranteed maximum price, if any.
  • The number and cost of change orders issued.
  • A narrative of the success or failures during the project.
  • Assessment of alternative contracting compared to the agency’s initial findings.
The procuring agency must submit the evaluation to the CPO, as the delegate of the DAS Director, within 30 days of the agency accepting the public improvement project.
 

Amendments, Protests, and Change Orders

Read the full sections on each of these subjects to learn more about requirements and how to process: