Municipal CMAR Contracting Comes to Minnesota
Category | Briefing Papers
Nathan is a member of the firm’s Construction Law Department. He can be reached at 612.359.7606 or nsellers@fwhtlaw.com.
The 2023 Minnesota Legislative Session wrapped up in late May with a flurry of consequential new laws. Among the bills that passed during the last week of the session was an amendment that will allow municipalities to use Construction Manager At-Risk contracting on many public works projects. This briefing paper explores the new law.
Existing law
Municipal contracting in Minnesota is governed by the Uniform Municipal Contracting Act, Minn. Stat. § 471.345. The Act defines municipalities to include any “county, town, city, school district or other municipal corporation or political subdivision of the state authorized by law to enter into contracts.” In other words, any non-state entity.
Minnesota municipalities currently have just two options for contracting construction work: low bid and best value. Under the traditional, low-bid option, municipalities may solicit sealed bids based on complete design documents and award the contract to the lowest responsive, responsible bidder. Under the best-value option, municipalities may solicit proposals based and award the contract to the proposer offering the “Best Value.” For purposes of determining “Best Value,” the Municipal Contracting Act cross-references the state agency best-value contracting act, Minn. Stat. § 16C.28.
New law: CMAR alternative
This spring, the Legislature passed and Governor Walz signed a bill amending the Municipal Contracting Act. Specifically, the Act was amended to offer municipalities a third option for contracting construction work: Construction Manager At-Risk (CMAR). The new municipal CMAR law will be codified at Minn. Stat. § 471.345, subd. 3b, and Minn. Stat. § 471.463 and will become effective on August 1, 2023, meaning all municipal construction contracts awarded after that day may utilize CMAR. The law brings Minnesota generally in line with neighbors to the south and west as Iowa, North Dakota, and South Dakota have recently adopted municipal CMAR contracting.[1]
The law will cover all municipalities, including any county, town, city, school district, or other municipal corporation or political subdivision of the state. And the law will apply to most contracts over $175,000; specifically, the law will apply to any “undertaking to construct, alter, or enlarge a building, structure, other improvement, except a street, road, highway, or bridge.”[2]
The language of the new law closely tracks and is very similar to the state agency CMAR contracting act, Minn. Stat. § 16C.34. In general, the new law gives municipal owners broad authority to award contracts to a CMAR through a robust solicitation and selection process. After selection, municipalities may then enter into a cost-plus GMP construction contract with the CMAR. The law generally calls for the CMAR to competitively bid all trade work, but allows the CMAR to submit bids to self-perform trade work at the owner’s discretion.
The details
The new municipal CMAR law defines a CMAR as one who “is selected by a municipality to act as a construction manager to manage the construction process, including but not limited to responsibility for the price, schedule, and workmanship of the construction performed.”[3] A CMAR contract is defined as “a contract for construction of a project between a [CMAR] and a municipality, which shall include a [GMP], construction schedule, and workmanship of the construction performed.”[4] GMP, in turn, is defined as “the maximum amount that a [CMAR] is paid pursuant to a contract to perform a defined scope of work.”[5] And GMP contract means “a contract under which a [CMAR] or subcontractor is paid on the basis of the actual cost to perform the work specified in the contract plus an amount for overhead and profit, the sum of which must not exceed” the contract’s GMP.[6]
The law requires a municipality to prepare a “request for qualifications” for each CMAR contract.[7] The RFQ must contain, at a minimum, the following elements:
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- Procedures for submitting qualifications, the criteria for evaluating the qualifications, and the relative weight for each criteria and subcriteria.
- Procedures for making awards in an open, competitive, and objective manner, “applying a scoring or trade-off evaluation method.”
- Proposed terms and conditions for the contract.
- Desired CMAR qualifications.
- Schedule for commencement and completion of the project.
- Requirements for insurance and payment and performance bonds.
- Material information in the municipality’s control, including surveys, soil reports, drawings, environmental studies; etc.[8]
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In addition, the RFQ may include a requirement that the proposer include the cost for the proposer’s services. But, in order to ensure maximum participation in the RFQ process, the RFQ may not impose unnecessary or unreasonable requirements.[9]
After receiving and ranking RFQs, the municipality will “conduct contract negotiations with the highest-ranked proposer to reach an agreement on the cost and terms of the contract.”[10] If agreement cannot be reached with the highest ranked proposer, the municipality may negotiate with the next highest ranked proposer, and so on.[11]
The chosen CMAR “shall competitively bid all trade contract work for the project from a list of qualified firms.”[12] The municipality and the CMAR will “jointly determine the composition of the list of qualified firms.”[13] The list “must be based on an open, competitive, and objective prequalification process.”[14] And a municipality and CMAR may, but are not required to, limit their list of qualified firms to qualified SBE or DBE firms, subject to availability.[15] The law further provides that with the municipality’s approval, the CMAR “may submit bids for trade contract work if the CMAR does not participate in the municipality’s review of the bids or selection decision.”[16]
Finally, the CMAR and the municipality “shall enter into a [GMP] contract for the project.”[17]
[1] Iowa Code ch. 26A; NDCC ch. 48-01.2; SDCL ch. 5-18B.
[2] Minn. Stat. § 471.463, subd. 1(i).
[3] Id., subd. 1(b).
[4] Id., subd. 1(c).
[5] Id., subd. 1(d).
[6] Id., subd. 1(e).
[7] Id., subd. 3(a).
[8] Id.
[9] Id., subd. 3(b), (c).
[10] Id., subd. 5(a).
[11] Id.
[12] Id., subd. 5(b).
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id., subd. 5(c)
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