Minnesota Legislature Establishes New Requirements for Public Contractors

by Dorsey & Whitney LLP
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On May 16, 2014, the Minnesota Legislature enacted a new statute that sets out several criteria for contractors bidding on public construction projects. The statute is effective as of January 1, 2015, and attempts to enhance accountability and transparency in the procurement of public construction projects. As of the effective date, contractors and subcontractors soliciting construction contracts for, or working on projects exceeding $50,000 from public entities in Minnesota must now qualify as “responsible contractors.” Any contractors or subcontractors soliciting work on a public project should be aware of the specific requirements of Minnesota Statutes § 16C.285 before submitting a solicitation document or verification of compliance.

In order to qualify as a “responsible contractor”, a bidder must meet minimum criteria under lowest responsible bidder or best value selection methods. The new statute applies to construction contracts let by state agencies, the Metropolitan Council, the Metropolitan Airports Commission, Minnesota State Colleges and Universities, the University of Minnesota and municipalities. Contractors seeking a construction contract with these public entities must submit a signed statement under oath verifying the contractor:

  1. is in compliance with workers’ compensation and unemployment insurance requirements, is registered with state agencies, has valid tax identification information, and has the authority to conduct business in Minnesota;
  2. is in compliance with federal labor laws and Minnesota statutes regarding wages without any violations during the three year period prior to submission of the verification of compliance;
  3. is in compliance with Minnesota statutes regarding independent contractors, construction codes, and licensing without any violations during the three year period prior to submission of the verification of compliance;
  4. has not had a certificate of compliance for public contracts revoked or suspended more than twice during the three year period prior to submission of the verification of compliance;
  5. has not received a monetary sanction from the Minnesota Department of Administration or Transportation for failure to meet targeted business goals more than once during the three-year period prior to submission of the verification of compliance;
  6. is not currently suspended or debarred by the federal government, state of Minnesota, or any political subdivision; and
  7. has verified that all subcontractors and vendors intended to work on the project verify under oath that they also meet requirements (1) to (6). However, violations that occurred before July 1, 2014, cannot be considered in determining “responsible contractor” status.

Even after a contractor submits the solicitation document and wins an award, the “responsible contractor” criteria must be met by any subcontractors later added to the project. Such subcontractors must submit a supplemental verification within fourteen days of retention, confirming compliance to the contractor (or subcontractor, in the case of a lower-tier sub-subcontractor) with which it has a direct contractual relationship. Contractors cannot be held responsible for false statements made by subcontractors unless the contractor had a direct contractual relationship with the subcontractor and accepted verification of compliance with actual knowledge that the subcontractor’s verification contained a false statement.

Contractors and subcontractors who fail to qualify as “responsible contractors” or make false statements under oath regarding the minimum criteria will be ineligible for the construction contract award or may lose the award. The new statute requires solicitation documents to state the consequences for failure to comply along with other key provisions and definitions. The actual language of Section 16C.285 can be found here.

Contractors and subcontractors vying for public construction awards should seek counsel before submitting solicitation documents to ensure compliance with the specific statutory “responsible contractor” criteria. Further, even after winning an award, contractors must be diligent in ensuring any subcontractors hired for the project also meet the “responsible contractor” criteria and timely submit supplemental verification.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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