Contractors seek solution to subcontractor blacklisting

For years contractors have wondered, when a public owner accepts a bid but rejects one or more subcontractors in it, is that owner creating or acting on a “blacklist” of firms with which it will not do business? Contractors fear blacklisting because it constitutes a kind of secret court of opinion from which there is no appeal.

Their worst fears were realized in 2004, when SPS seemingly confirmed the existence of blacklisting during the bidding on school projects under program manager LeNir Ltd.

LeNir informed prequalified general contractors that there was a “blacklist” and a “graylist” of subcontractors with whom the schools preferred not to work.

Contractors were told that including blacklisted subs could result in rejection of their bids.

However, the general contractors were not told which subs were on the list, and no list was ever produced, despite repeated requests by Springfield Contractors Association.

Scott Wendt, director of capital construction at SPS since 2006, said to his knowledge, the district does not have a blacklist and questions whether such a document would be legal.

In his experience as deputy director of facilities, Wendt said, “If we’ve had a working relationship in the maintenance facilities operation and we’ve had ongoing problems with a particular sub, there’d be communications with that sub.”

Communication – and fairness – is what contractors and subs want.

“The contractors have said, ‘Hey guys, if you’ve got any sub, supplier, contractor or anything else that’s on your quote-unquote black list … you owe it to the qualified contractors to say who they are so they don’t inadvertently use them,’” said Jim Carson, vice president of Carson Mitchell Inc., in a 2006 interview.

A fair way

Whether it’s called a blacklist or a greylist, or if there even is a list, the fact is that public owners do have firms they do not want to work with – and sometimes with good reason, said Carson, who is SCA’s 2007 president.

Maybe the owner had a bad experience with a subcontractor that was hard to communicate with or didn’t do quality work.

But contractors argue there needs to be a fair way for public owners to communicate that preference so that firms don’t waste time and money bidding jobs for which they won’t be considered.

“If they do not intend to use XYZ subcontractor, XYZ should not be put to the expectation that they might get this job and spend the money estimating. That’s just fair,” Carson added. “That’s where a lot of the general contractors and subcontractors come down.”

A system that grades subcontractors on their performance would help. The problem for public owners is the liability, labor, cost and bureaucracy that would come with a system for tracking and grading performance, as well as providing a forum to appeal the decisions of that system and resolve disputes.

Another option for owners might be payment and performance bonds, said Jim Blose, vice president/area manager with Flintco Inc.

Flintco is currently working on the Weller addition and renovation.

“A public entity can require the subcontractor to provide a payment and performance bond, just like they do with their general contractors. And I have seen documents on public jobs in the past where that was a requirement,” Blose said. “That will assure financially viable subcontractors who have a reputation for quality are performing the work.”

In the meantime, contractors say, the way public owners handle their subcontractor preferences continues to be problematic.

“For example, the city of Springfield has a provision in their contract that says if they don’t like a subcontractor that we name, they can require us to replace that subcontractor with somebody else at no additional cost to the city,” Carson said “That’s not fair. We have to bid to try to get the lowest price. If they don’t like who we use, we’ve used the low-price subcontractor; anybody else, it’s going to be higher.”

Why, Carson asks, should the contractor bear that cost?

“That makes no sense, for them to be allowed to require us to replace a subcontractor with a higher cost one at our expense, when they’re the ones that had the issue,” Carson said.

Carson said SCA’s various committees will continue to work with public owners on this issue.