Bill Summary – FastDemocracy

Legislative Analysis
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STATE CONTRACTING SELECTION PROCESS
                                                                            http://www.house.mi.gov/hfa
House Bill 5654 (H-1) as reported from committee                            Analysis available at
Sponsor: Rep. Amos O’Neal                                                   http://www.legislature.mi.gov
Committee: Regulatory Reform
Complete to 6-20-24
SUMMARY:
       House Bill 5654 would amend the Management and Budget Act to modify the requirements
       for the section of architects for architectural services, professional engineers for engineering
       services, professional surveyors for land surveying services, and qualified firms for proposed
       projects of the Department of Technology, Management, and Budget (DTMB) and state
       agencies for the period between January 1, 2025, and December 31, 2032.
       Currently, the act requires selections for these services to be made in accordance with
       competitive, qualifications-based selection processes and procedures for the type of
       professional service, as determined by DTMB.
       Selecting a qualified firm
       Under the bill, from January 1, 2025, to December 31, 2032, in selecting professionals for these
       services with an estimated cost of $250,000 or more, DTMB or the relevant state agency would
       have to publish a notice requesting a statement of interest in the proposed project by any
       qualified firm, along with a statement of qualifications and performance data from that
       qualified firm. The published notice would state the general scope and nature of the proposed
       project for which services are required and include contact information for a representative of
       the department or state agency who can provide further details of the proposed project.
               Qualified firm would mean a sole proprietorship, partnership, corporation, or limited
               liability company through which a person licensed as an architect, professional
               engineer, or professional surveyor under the Occupational Code offers or provides
               architectural services, engineering services, or land surveying services to the public.
       The department or state agency would have to evaluate the statements of interest, statements
       of qualifications, and performance data submitted by qualified firms. In evaluating a firm for
       a proposed project, they would have to consider all of the following:
           • Qualifications of the firm.
           • Ability of the professional personnel of the firm.
           • Past record and experience of the firm.
           • Any other qualifications-based factors that the department or state agency determines
               are applicable.
       The department or agency could also conduct discussions with and require presentations by
       any qualified firm being considered to provide the required services.
House Fiscal Agency                                                                          Page 1 of 5
         Negotiating an agreement
         Based on the information gathered as required or allowed by the bill, DTMB or the state agency
         would have to select and rank the qualified firms in order based on their qualifications and
         enter into contract negotiations with the highest-ranked firm. If the department or agency is
         unable to negotiate a contract with the firm, the negotiation would be formally terminated and
         would begin with the next highest-ranked firm. This would continue until an agreement is
         reached or the process is terminated.
         If a no satisfactory contract can be reached with any of the selected firms, the department or
         state agency would have to reevaluate the services requested, including the estimated value,
         scope, complexity, and fee requirements.
         Waiving requirements
         The bill would allow DTMB or a state agency to waive the requirements described above if it
         determines that an emergency situation exists and a qualified firm must be selected in an
         expeditious manner. The requirements could also be waived if the proposed project is for
         energy conservation improvements to state facilities described in section 253 of the act. 1
         Report
         The bill would require DTMB to submit a report to the legislature annually on January 1 from
         2026 to 2033 that includes all of the following information for the immediately preceding year:
            • A summary of whether qualified firms that were selected for contracts under the bill
                 offered new ideas, technology, materials, construction techniques, or other innovations.
            • A summary of whether projects contracted for under the bill were completed on
                 schedule or otherwise met scheduled deadlines.
            • A summary of whether projects contracted for under the bill stayed on budget.
            • An analysis of whether there was greater collaboration between the department or state
                 agency, as applicable, and the qualified firm to reduce misunderstandings and project
                 risk compared to projects contracted prior to the bill’s implementation.
            • An indication of whether design documents of projects contracted for under the bill are
                 considered to be at a high level.
         Exemption
         The bill’s requirements would not apply to selections of contractors if the selections are in
         compliance with 23 USC 112, 2 which regulates bidding requirements for state transportation
         departments.
         MCL 18.1237b
BRIEF DISCUSSION:
         The bill is similar to Senate Bill 642 of 2021, 3 which was pocket vetoed by Governor
         Whitmer. 4
1
  https://www.legislature.mi.gov/Laws/MCL?objectName=MCL-18-1253
2
  https://www.law.cornell.edu/uscode/text/23/112
3
  https://www.legislature.mi.gov/Bills/Bill?ObjectName=2021-SB-0642&QueryID=160300287
4
  If the governor does not sign a bill within 14 days after getting it and the legislature has adjourned to end the session,
the bill does not take effect and is said to have been “pocket vetoed.” Senate Bill 642 was pocket vetoed on January
House Fiscal Agency                                                             HB 5654 (H-1) as reported      Page 2 of 5
        Supporters of the bill argue that it would help to ensure transparency and equal opportunity in
        the selection process.
        In testimony on Senate Bill 642 last session, DTMB testified that Michigan uses a “best value”
        system rather than a straight “low-bid” system when determining which vendor to select for a
        service. The evaluation process is weighted, with 80% based on performance quality and other
        qualification and 20% based on estimated hours and cost to complete the work. The department
        opposed the proposal, arguing that estimated hours should be a part of the information required
        during the vendor selection process, while design firms opposed adding the requirement,
        preferring instead to have it be determined during the contract negotiation process.
FISCAL IMPACT:
        House Bill 5654 could result in increased costs to the state in the short-term and cost savings
        to the state in the long-term, for an overall indeterminate fiscal impact. The state could see
        increases in state contracting costs for architectural, engineering, and surveying services for
        state design and construction projects if qualified, lower-priced firms are passed over in favor
        of more qualified and higher-priced firms. The bill would largely codify much of the current
        procurement process used by DTMB when evaluating and selecting contracted services, but
        costs would not be included among the required factors for evaluating firms in the competitive
        bid process for proposed state projects as they are under current procurement practices.
        DTMB reports that a majority of design contracts go to those firms that provided the lowest
        cost proposal. Additionally, DTMB reports that a review of state architecture and engineering
        service projects over $250,000 since 2014 showed an error and omissions rate of 0.15% of the
        related construction costs, well below the 3% to 5% rate industry standard that would lead to
        corrective action. Considering this, DTMB does not believe there would be significant cost
        savings through error reduction and believes that the bill would likely lead to increased costs
        to the state in the short and long terms.
        Qualifications-based selection has been shown in studies to offset savings from low-bid or best
        value procurement processes and also significantly reduce long-term costs in the construction
        of projects and the maintenance of facilities through various life-cycle costs.
        Any potential short-term cost increase would affect any state department or agency that
        contracts for projects utilizing these services. In FY 2021-22, the state Design and Construction
        office under DTMB oversaw approximately 550 active projects with a total project value of
        approximately $1.2 billion.
        Additionally, DTMB may incur additional costs related to the bill’s annual reporting
        requirement if existing staff is not able to adequately organize and report the required
        information.
        The bill would have no fiscal impact on local units of government.
11, 2023, when still unsigned having been presented to the governor on December 28, 2022, which was also the date
the legislature adjourned sine die (without day) to end the legislative session.
House Fiscal Agency                                                      HB 5654 (H-1) as reported    Page 3 of 5
POSITIONS:
       A representative of the American Council of Engineering Companies of Michigan and the
       Michigan Section of the American Society of Civil Engineers testified in support of the bill.
       (6-11-24)
       The following entities indicated support for the bill:
          • American Society of Architects (6-11-24)
          • Cincar Consulting Group (6-11-24)
          • Gowrightman (6-11-24)
          • Great Lakes Chapter of the International Institute of Building Enclosure Consultants
               (6-11-24)
          • HED Design (6-11-24)
          • HNTB Corporation (6-11-24)
          • Hubbell, Roth, & Clark (6-11-24)
          • Johnson Controls (6-18-24)
          • Michigan Society of Professional Engineers (6-11-24)
          • Michigan Society of Professional Surveyors (6-11-24)
          • OHM Advisors (6-11-24)
          • Sedgewick & Ferweda Architects (6-11-24)
          • SME USA (6-11-24)
          • Somat Engineering Inc. (6-11-24)
          • Wade Trim (6-11-24)
          • WSP Michigan (6-11-24)
          • WSP USA (6-11-24)
       The Department of Technology, Management, and Budget indicated opposition to the bill.
       (6-18-24)
                                                        Legislative Analyst:    Alex Stegbauer
House Fiscal Agency                                             HB 5654 (H-1) as reported   Page 4 of 5
                                                               Fiscal Analyst:    Michael Cnossen
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency                                               HB 5654 (H-1) as reported   Page 5 of 5
Statutes affected: 
Substitute (H-1): 18.1237
House Introduced Bill: 18.1237
As Passed by the House: 18.1237