SECTION 27.7. Design-Build Contracts

(a) Applicability. The department may prequalify a private entity to submit a detailed proposal to provide services under a design-build contract. The department is not required to publish a request for qualifications for a design-build contract, and may enter into a design-build contract based solely on an evaluation of detailed proposals submitted by prequalified private entities in response to a request for proposals. If the department develops a concept for private participation in an eligible design-build project, or proceeds with the further evaluation of an unsolicited proposal for an eligible design-build project, and chooses to prequalify private entities to submit a detailed proposal without publishing a request for qualifications, it will proceed in accordance with the requirements of this section. Each entity comprising a team that intends to submit a detailed proposal must be prequalified or precertified in accordance with the requirements of this section.

(b) Prequalification.

(1) Audited financial qualification of construction, maintenance, and operations providers. Unless waived under subparagraph (B) of this paragraph, to be eligible to propose on a design-build contract as a provider of construction services, maintenance services, or operations services, a potential proposer must be prequalified in accordance with subparagraph (A) of this paragraph.

(A) Requirements.

(i) To be prequalified to propose, either individually or as a member of the proposers' team, as a provider of construction, maintenance, or operations services on a design-build contract, a private entity must:

(I) submit a completed confidential questionnaire to the department's Construction Division in Austin at any time, but at least 120 days prior to the due date for a response to a request for proposals, in a form prescribed by the department, which shall include certain information concerning the proposer's equipment, experience, and financial condition;

(II) have its certified public accountant submit the audited and other financial information required by the current edition of the department's Bulletin Number 2, titled "Contractor's Financial Resources";

(III) demonstrate it has the financial capacity to complete, operate, and maintain, as applicable, a specific project. Factors that will be considered in assessing a proposer's financial capacity include:

(-a-) the proposer's current financial strength;

(-b-) the proposer's credit quality;

(-c-) any claims, litigation, or equivalent current or pending against the proposer;

(IV) demonstrate, if it will be the prime provider of construction services under a contract, that it is capable of obtaining payment and performance bonds in the amount of $250 million, or 100% of the construction cost of the project, whichever is less, from a surety rated in the top two categories by two nationally recognized rating agencies or at least A minus (A-) or better and Class VIII or better by A.M. Best and Company, or an alternative form of security in the amount of $250 million, or 100% of the construction cost of the project, whichever is less, in accordance with §27.3 of this subchapter (relating to General Rules for Private Involvement);

(V) satisfactorily comply with any technical qualification requirements determined by the department to be necessary for a specific project; and

(VI) for the purpose of proposing on federal-aid projects, properly complete the Certification of Eligibility Status form contained in the Confidential Questionnaire.

(ii) The department will make its examination and determination based on the information submitted, and advise the potential proposer of its approved design-build contract capacity. Information adverse to the potential proposer contained in the Certification of Eligibility Status form will be reviewed by the department and the Federal Highway Administration, and may result in the proposer being declared ineligible to submit proposals on federal-aid projects.

(iii) Satisfactory audited financial information and financial capacity will grant a 36-month period of prequalification from the date of the department's determination.

(iv) The department may require current audited information at any time if circumstances develop which are factors that could alter the firm's financial condition, ownership structure, affiliation status, or ability to operate as an on-going concern. The potential proposer must immediately notify the department in writing of any material changes in its financial condition that occur while the department is conducting its examination.

(v) The department may grant a 90 day grace period of prequalification, for the purpose of preparing and submitting current audited information prior to the expiration of the 90 day period of prequalification.

(B) Waiver.

(i) The department will waive the audited financial qualification requirements of subparagraph (A) of this paragraph if the department's estimate is $10,000,000 or less unless the executive director or the director's designee determines that audited financial qualification should be required due to:

(I) safety considerations;

(II) the complexity of the work; or

(III) the potential impact of the work on adjacent property owners.

(ii) To be eligible to propose on a design-build contract for which the audited financial qualification requirements have been waived under clause (i) of this subparagraph, a proposer must:

(I) submit a proposer's questionnaire, in a form prescribed by the department, which includes certain information concerning a proposer's equipment and experience;

(II) submit unaudited and other data as required in the instructions to the proposer's questionnaire;

(III) demonstrate it has the financial capacity to complete, operate, and maintain, as applicable, a specific project. Factors that will be considered in assessing a proposer's financial capacity include:

(-a-) the proposer's current financial strength;

(-b-) the proposer's credit quality;

(-c-) any claims, litigation, or equivalent current or pending against the proposer;

(IV) demonstrate, if it will be the prime provider of construction services under a contract, it is capable of obtaining payment and performance bonds from a surety rated in the top two categories by two nationally recognized rating agencies or at least A minus (A-) or better and Class VIII or better by A.M. Best and Company, in an amount that is sufficient to ensure the proper performance of any agreement and protects the department and payment bond beneficiaries supplying labor or materials to the proposer or a subcontractor of the proposer, or an alternative form of security in accordance with §27.3 of this subchapter;

(V) satisfactorily comply with any technical qualification requirements determined by the department to be necessary on a specific project; and

(VI) for a federal-aid project, properly complete the Certification of Eligibility Status form contained in the proposer's questionnaire. Information adverse to the potential proposer contained in the certification will be reviewed by the department and by the Federal Highway Administration, and may result in the proposer being declared ineligible to submit a proposal on a federal-aid project).

(iii) The department will make its examination and determination based on the information submitted, and advise the proposer of its approved design-build contract capacity.

(I) A proposer with no prior experience in construction, maintenance, or operations, or a negative working capital position (i.e., financial statements indicate that current liabilities exceed current assets), will receive a design-build contract capacity of not less than $1,000,000.

(II) An experienced proposer with sufficient working capital and financial capability, as determined by the department, will receive a design-build contract capacity of:

(-a-) not less than $10,000,000 for a proposer submitting compiled financial information if the proposer has at least one year experience in construction, maintenance, or operations and has satisfactorily completed at least two projects in these fields;

(-b-) not less than $25,000,000 for a proposer submitting compiled financial information if the proposer has at least two years experience in construction, maintenance, or operations and has satisfactorily completed at least four projects in these fields. Those contractors possessing more than two years experience but less than five years experience will be granted at least an additional $5,000,000 in design-build contract capacity for each additional year of experience in construction, maintenance, or operations; and

(-c-) over $50,000,000 for a proposer submitting reviewed financial information if the proposer has at least five years of experience in construction, maintenance, or operations and has satisfactorily completed at least four projects in these fields.

(2) Financial statements. For purposes of this section:

(A) An audited financial statement involves an examination of the accounting system, records, and financial statements by an independent certified public accountant in accordance with generally accepted auditing standards. Based on the examination, the auditor expresses an opinion concerning the fairness of the financial statements in conformity with generally accepted accounting principles.

(B) A reviewed financial statement is substantially less in scope than an audited financial statement, and consists primarily of inquiries of proposer personnel and analytical procedures applied to financial data by an independent certified public accountant. Only negative assurance is expressed by the auditor, meaning the auditor is not aware of any material modifications that should be made in order for the financial statements to conform to generally accepted accounting principles.

(C) A compiled financial statement is limited to presenting in the form of financial statements information that is the representation of management. No opinion or any other form of assurance is expressed on the statements by the auditor.

(c) Precertification.

(1) Contract Eligibility. To be eligible to perform work on a design-build contract in the categories approved according to §9.43 of this title (relating to Precertification Requirements), a prime provider and a subprovider must be precertified in accordance with this section unless:

(A) the anticipated work in an individual work category is less than 2.5% of the contract; or

(B) the department has waived the precertification requirements for a contract that is less than $10,000,000.

(2) Application.

(A) Registered architects, registered professional engineers, registered or licensed professional surveyors, and other technical staff who desire to be precertified by the department to perform engineering, architectural, or surveying work on design-build contracts, shall submit a completed precertification application to the department for review and determination of precertification status.

(B) An application form prescribed by the department may be obtained by contacting the Texas Department of Transportation, Design Division, 125 East 11th Street, Austin, Texas 78701-2483, or through the department's web site.

(C) The application form will request information concerning the experience of the individual.

(D) The precertification web site will include:

(i) a copy of the application form;

(ii) instructions concerning submittal of information for precertification, including format and length restrictions for data to be submitted; and

(iii) the requirements for precertification in each category.

(E) The submittal date for review deadlines as described in paragraph (3) of this subsection shall be the date the precertification application is received by the department.

(F) The precertification of a provider by the department does not guarantee that work will be awarded to that provider.

(3) Deadline. When precertification is required as described in paragraph (1) of this subsection, prime providers and subproviders must be precertified in the technical categories by the due date for responses to a request for proposals to be eligible to submit a response.

(4) Data management. The department will maintain the qualification information submitted in the precertification application by the firm for an employee.

(5) Firm and employee status.

(A) A firm may be precertified in a work category if the firm has a current employee precertified in the category.

(B) A firm employee may be precertified in a work category if the employee possesses the skills and experience to meet the requirements. An employee is not precertified based on the firm's experience.

(C) A precertification will transfer with the employee if the employee leaves the firm.

(D) The department may review a firm's information to evaluate whether the support, equipment, and other resources necessary to do the work are provided to the employee.

(E) A firm with one employee who is precertified in multiple work categories is precertified in those categories. When required, prime providers and subproviders must be precertified in the categories of work they will be performing; however, a provider or subprovider is not required to be precertified in every category of work involved in the contract, unless it will be performing in a lead capacity on all categories of work.

(6) Review process.

(A) An individual, and therefore the firm, will be precertified within 60 days of receipt of complete and accurate information for the submittal, or notified in writing within the same time period that they did not meet the requirements for precertification or that additional submittals will be required for review.

(B) If the submittal is incomplete, a firm will be requested to submit additional information for review. The firm shall submit such information within 30 days of receipt of the department's request for such information. If the information is not provided within 30 days after receipt of the request, the application for precertification will be processed with the information available. The department will make a determination on precertification status within 60 days of receipt of the additional information.

(C) The department will consider the following factors in reviewing the precertification applications:

(i) current license or registration;

(ii) personal experience and training; and

(iii) work category requirements as maintained on the department's web site.

(7) Updates. A firm must report any change in the information included in the original application no later than 45 days after the change occurs.

(8) Appeal. A firm may appeal denial of precertification by submitting additional information to the department within 30 days of receipt of written notification of denial. This information shall justify why the applicant meets the requirements for precertification. The department will review the information and make a determination regarding precertification. A firm may file a written complaint regarding precertification denial with the executive director or his or her designee.

(9) Precertification requirements.

(A) Eligible employees. A firm may be precertified in the technical work categories maintained on the department's web site by providing the listed requirements. A firm may only submit an application for an individual who is employed by that firm at the time of submittal for precertification.

(B) Experience. The experience used to meet requirements may be either prior to or after licensure unless otherwise stated in a specific category. For the purpose of experience for precertification, the employee may be licensed to practice in any state for which that experience is recognized by the:

(i) Texas Board of Professional Engineers for engineers;

(ii) Texas Board of Architectural Examiners for architects; or

(iii) Texas Board of Professional Land Surveying for land surveyors.

(10) Work categories. The approved precertification work category definitions and requirements will be maintained on the department's web site. The commission, by minute order, may add, revise, or delete a work category.

(d) Requests for proposals for design-build contracts.

(1) Requests for proposals. If authorized by the commission, the department will issue a request for proposals from all private entities prequalified in accordance with this section, and the process will proceed in the manner described in §27.4(e) - (l) of this subchapter.

(2) Additional evaluation criteria. In addition to the evaluation criteria set forth in §27.4(e) - (l), design innovation shall also be a criterion in evaluation of proposals submitted in response to a request for proposals for a design-build contract.

Source Note: The provisions of this §27.7 adopted to be effective May 17, 2007, 32 TexReg 2670