2024 Legislative Session Outcomes for Procurement and Contracting

I am guessing many of my procurement peers are right now actively focused on implementing all the changes due next month that were brought about by the 2023 legislative session, including changes concerning the small public works roster, apprenticeship requirements, and updated procurement limits. If these topics are still of interest to you, see Part 1 and Part 2 of my blog series on 2023 legislation focused on procurement and contracting. 

The 2024 legislative session continued to impact public works procurement and contracting. This blog will focus on a few pieces of new legislation that will impact public works procurement and contracting, both this year and beyond.

HB 2136: Prevailing Wage Sanctions, Penalties, and Debarment

HB 2136 will amend state prevailing wage laws to extend contractor sanctions to their “substantially identical” companies.

Effective January 1, 2026, a contractor is subject to the same sanctions or debarment from bidding on public works projects if it has substantially identical operations, corporate, or management structure to another entity that has been sanctioned or debarred under state prevailing wage laws.

On the effective date (January 1, 2026), the following two items will be added to the state law governing prevailing wages:

• A definition of "contractor" in RCW 39.12.010. This definition will include factors to determine whether a contractor has substantially identical operations.
• A new section in chapter 39.12 RCW to enforce the extension of contractor sanctions.

SB 6040: Review of Prompt Payment in Public Works

Washington State law under RCW 39.76, outlines specific prompt pay requirements regarding payment timelines in public works contracts. RCW 39.76 establishes deadlines for prime contractors to pay subcontractors and for public agencies to pay prime contractors.

Effective March 26, 2024, SB 6040 requests a review and recommendations on:

• How well prompt pay provisions are working for small businesses, particularly for women and minority-owned businesses;
• Potential improvements to existing prompt pay provisions that could be considered; and
• Potential impacts on the industry.

SB 6040 directs the Capital Projects Advisory Review Board (CPARB) to review current statutes governing prompt payment. The statutes identified for review in the bill include the following: 39.04.250, 39.76.011, and 39.76.020.

In addition to reviewing prompt pay statutes, this legislation requires CPARB to review and develop recommendations for the following:

• Requirements that state and local entities pay a prime contractor within 30 days for work satisfactorily completed or materials delivered by a subcontractor of any tier that is a small business or women- or minority-owned business.
• Requirements that within 10 days of payment, the prime contractor and each higher tier subcontractor must make payment to its subcontractor until the small business or women- or minority-owned business has received payment.

CPARB must complete this review and make recommendations to the appropriate committees of the legislature on or before November 1, 2024.

SB 6192: Construction Project Change Orders

In Best Practices for Change Orders, the Washington State Auditor’s Office defines a change order as “an add-on or deletion to a contract after the scope of work has already been agreed to and the contract signed.”

Earlier this month (June 6, 2024), SB 6192 updated requirements for additional work and change orders on public and private construction projects. This legislation amended RCW 39.04.360 with the following:

• Change order requirements for public works projects are applied to private construction (owner), except private residential projects under 12 units.
• Subcontractors and suppliers are included, so that for any additional work by a contractor, subcontractor, or supplier not in dispute, a change order must be issued by an owner, state agency, or local government within 30 days after receipt from the contractor for issuance of a change order.
• Within 10 days of receipt of a change order from the owner, state agency, local government, or upper-tier contractor, the contractor or subcontractor must issue change orders to lower-tier subcontractors impacted by the change.
• If the owner, state agency, or local government does not issue such a change order within the 30 days, or the contractor or upper-tier subcontractor does not issue a change order to lower-tier subcontractors within 10 days after receipt of the approved change order, interest must accrue on the amount of the additional work satisfactorily completed until a change order is issued.
• The contractor or subcontractor must request a change order within 30 days of satisfactory completion of any authorized additional work and a request by a subcontractor or supplier. A lower-tier subcontractor or supplier must request a change order from the upper-tier contractor 30 days after the completion of additional work and a request from a lower-tier subcontractor.
• If a contractor or subcontractor has requested a change order within 30 days of a request from a subcontractor or supplier, the contractor or subcontractor is not liable for any interest on the unpaid dollar amount for any additional work completed and not in dispute if a change order has not been issued.

To summarize all the updates to RCW 39.04.360 and how this might impact local governments, I would recommend that as soon as additional work is approved as part of a public works project, an agency should issue a change order for the contract.

Lastly, SB 6192 provides that an aggrieved party may bring a civil action for violations of change order requirements in a court of competent jurisdiction for appropriate relief, including interest and reasonable legal fees and costs. However, as will be reflected in updates to RCW 39.04.360, it does not provide any rights to a contractor, subcontractor, or supplier against a party with whom they are not a party to a written contract.

Conclusion

The 2024 legislative session legislation will impact public works procurement and contracting both now and in the future. Immediately, SB 6192 will impact how state or local government agencies manage change orders. In the future, HB 2136 brings additional oversight and sanctions to contractors that violate Washington State's prevailing wage laws. And finally, SB 6040 supports our state’s small businesses community by continuing to refine prompt pay requirements and recommending potential changes.