Focus on New Laws: Water Tank Maintenance Contracts

The law removes a special procurement option some cities have been using for their drinking water systems.
(Published Jul 30, 2018)

A 2018 law, Chapter 124, removes a previously allowed option under Minnesota Statutes, section 471.345, subdivision 5b, of including water tank maintenance work under a multiyear professional engineering service contract.

That law was created in 2002 and made it possible for a city to choose to have their professional engineering contract cover those maintenance needs, which allowed the total package to be entered into through direct negotiation or a request for proposals. This was a contracting option that many cities have found useful.

Previous legislative proposals
Over the past 10 years, legislation has been proposed on many occasions to remove city authority to use special procurement options when dealing with water tank maintenance for a municipal water supply.

Those proposals have also included removing existing requirements that a Minnesota-certified professional engineer review all work done on public water supplies to ensure the work meets all applicable codes and standards; financial protections on the maximum annual payment that can be required of small utilities; and a three-year minimum for payment due on work identified during the project that is needed to bring a municipal water system into compliance with local, state, and federal requirements. Further, the bid threshold proposed for water tank maintenance work was generally proposed to be between $10,000 and $50,000, vastly lower than the normal city bid threshold for other contracts.

Negotiations result in new focus
As a result of negotiations with the League over the past two years, the 2018 bill authors and proponents of the legislation agreed to drop all of those provisions. The focus was kept on how cities contract the physical work done on a water tank system.

Because of the language being dropped and the linkage of the bid requirements to existing competitive bid procedures, the League took a neutral position on the bill and accepted the final proposed change as a reasonable compromise. However, the League did not think the change was needed or useful for cities.

Under the new statute, if the cost of a contract for the sale or purchase of supplies, materials, equipment, or the rental thereof, or the construction, alteration, repair, or maintenance of real or personal property entered into under this subdivision is estimated to exceed the competitive bid threshold (as of Aug. 1, 2018, this is $175,000), a city would need to separately bid using either the low bid or best value bid procurement process, as required for other city contracts.

The change applies to contracts entered into on or after Sept. 1, 2018. Prior to that, the existing option of including the work under a professional service arrangement is still permitted.

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