The State Auditor’s March 2011 audit of Missouri Transportation Development Districts (“TDD”) reports that some TDDs are not complying with public contracting requirements applicable to certain TDD construction projects. The problem likely arises from the absence of clear direction under Missouri law as to when such requirements apply to quasi-governmental bodies such as TDDs making it necessary for TDDs to analyze the requirements on a case-by-case basis.
- Competitive bidding: TDDs are required to competitively bid “all construction contracts in excess of $5,000.” R.S.Mo. § 238.252(2). Competitive bidding may also be required if a board member has a conflict of interest pursuant to R.S.Mo. §§ 105.452 or 105.458.
- Public works bonding: Is the project a “public work” as defined by R.S.Mo. §107.170? Will the TDD “own” the project? If the answer is yes to both, then public works bonds are most likely required. In some instances, TDD “ownership” may be avoided through carefully structured lease relationships or public dedication of the project after final completion of construction. On the other hand, if bonds are not required, the project may be subject to mechanic’s liens of unpaid contractors.
- Prevailing wages: Is the project a “public work” as defined by R.S.Mo. § 290.210(7)? Was the work performed “on behalf of” the TDD? The “on behalf of” determination is dependent upon whether the public body has “sufficient control” over the public works project to impute an employment relationship between the public body and the contractor. Payment of prevailing wages may not be required if the project is constructed prior to formation of the TDD or if the TDD’s only involvement is providing limited financing. However, in each instance, the TDD should carefully analyze all facts and circumstances because no two projects are the same.
- Is the project located within an economic development district? Often times when a TDD is formed in conjunction with a project receiving economic development incentives, the local governing body will require voluntary compliance with public contracting requirements for the entire project.
While competitive bidding, public works bonding, and payment of prevailing wages are not the only public contracting requirements applicable to TDDs, they certainly can have the most substantial time and cost impact on a project. Furthermore, failure to comply with these requirements can subject the individual officers of the TDD to fines and criminal penalties, and can put the TDD at risk of paying project costs twice.