Legal question could stall Missouri’s plan to repair 800 bridges

Concern over performance bonds may cost the state one bidder

News The Associated Press June 18, 2007
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A legal question regarding the bidding process is threatening to disrupt Missouri's efforts to repair and maintain 800 of its worst bridges, according to the Associated Press.

Concern over the size of performance bonds required from potential contractors may cost the state one of its two bidders on the massive project, which includes fixing or replacing nearly 80% of the state's substandard bridges by 2012, the AP reported.

The initiative could be in danger if one of the bidders pulls out, because state law requires two bidders.

"We're scrambling trying to find a solution," Pete Rahn, director of the Missouri Department of Transportation (MoDOT), told the Kansas City Star.

The state had planned to award the bridge contract next month, according to the AP,but now may be forced to wait until October so the issue can be resolved.

One of the teams bidding on the project is led by United Contractors of Great Falls, S.C.; the other is led by Zachry American Infrastructure of San Antonio.

Announced last year, the project includes 800 bridges in one contract that would cover design, construction and 25 years of maintenance, the AP reported. Its goal is to get the bridges fixed faster and cheaper than bidding each of the 800 structures separately.

The problem concerns performance bonds, which are designed to protect taxpayers if a contractor
abandons a project after it has started. How much of a performance bond contractors will need for a project that could cost $400 million to $600 million could determine whether a prospective contractor would bid on the project, according to the AP.

"We don't want a team to withdraw," Rahn told the Star. "If we force this issue today, I think, we lose a team."

Rahn added that any delays could threaten the project, since the contracting teams have already spent millions preparing their bids.

"The longer you drag this out, the more cost they have invested," he told the paper. "The risk is one of them says, 'You know what? We're going to cut our losses here and stop.'"

The legal issue in question is how to interpret a state law governing performance bonds, the AP reported.

Highway department lawyers believe MoDOT can set the bond, Rahn told the paper, which in this case would equal the amount of construction in any single year. One bidding team, however, believes state law imposes a 30-year bond for the total project cost.

The difference could add millions of dollars to the project, making it cost-prohibitive. Under the costlier scenario, Rahn told the paper, contractors would have to pledge so many of their assets to back the bond that it would be hard to secure other construction work.

Rahn told the paper that bonding requirements in state law did not consider the kind of large, long-term project that MoDOT has proposed with the 800 bridges.

United Contractors President Jim Triplett said the state needs to adopt legislation clarifying the legal problem, according to the AP, but a bill attempting to do that died in the Legislature earlier this year.

A spokesman for Gov. Matt Blunt said he is considering requests for a special session this year, including one that would rectify the bond question, the AP reported.

"We are exploring every other option besides changing the law, but we're not finding easy solutions," Rahn told the Star. "Without some legal epiphany, I think we're going to end up needing a law change."

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