When it comes to public projects in the Commonwealth of Pennsylvania, the Separations Act is a major impediment to public entities that want to utilize design-build or engineer-procure-construct (EPC) project delivery models.

In Pennsylvania, the Architects Licensure Law defines design-build as “a project delivery method whereby a design-build entity signs a single contract to provide a combination of architectural and construction services to a client.” Similarly, the EPC model is a single point project delivery model whereby an owner contracts with one entity responsible for engineering, designing, and constructing the project, taking it from start to finish and, depending on the terms of that agreement, often delivering a “turn-key” facility. As a general statement, EPC projects are impacted by the same laws that apply to design-build projects.

While the Pennsylvania Procurement Code authorizes state agencies and state-related institutions to enter into design-build agreements for public projects, the Separations Act interferes with applying the design-build or EPC methods. The Separations Act requires public entities to solicit bids and award multiple and separate prime contracts for general construction services, electrical, HVAC, and plumbing for projects with total costs of construction exceeding $4,000. The Separations Act does not mention the public entity contract for the design, which seems to imply that it will be a separate pubic entity/designer contract as is typical with design-bid-build projects. Another drawback is that the Separations Act forces a public entity owner to act as a quasi-general contractor/construction manager. Indeed, as a Pennsylvania court has held, a public entity cannot delegate the task of awarding prime contracts, or any other oversight responsibilities, to a construction manager or general contractor.

The Separations Act requirement that public entity owners separately contract with certain trades eliminates a public entity’s ability to enter into a design-build delivery method when there is a single contract with a design-builder.

There is yet another hurdle in implementing design-build: the requirement that public entities comply with Pennsylvania’s Procurement Code and its competitive sealed bidding requirements. The Code favors the design-bid-build procurement model as it allows the public entity a vehicle to select the lowest responsible bidder. Design-build does not lend itself to awarding the lowest responsible bidder. While in some states the public entities go through the artifice of having competitive design-build based on 30% design drawings, this model seems to be a marriage of the worst of design-bid-build with the worst of design-build. This is because an advantage of design-build is to limit the public entity’s exposure to the time performing the design and to give contractors and the designer more latitude to work together and use their imagination. Much of that opportunity is taken away by an only 30%-complete design. Further, it does not limit the public entity’s exposure to claims for extra work as the use of 30%-complete design drawings still carries with it exposure for errors or design deficiencies found in the 30% design and those not yet found in more complete iterations of the design.

There is no doubt there is a need for change. Pennsylvania seems to be the lone remaining state requiring separate contracts for each portion of a public building contract. Criticism of the Separations Act is also based on the strikingly low $4,000 threshold, which has not changed since 1981. Thus, the Separations Act essentially applies to any public project, given current financial magnitudes for even “simple” construction work.

Pennsylvania lawmakers have taken note of some of this criticism. House Bill 710, whose primary sponsor is Representative Perry A. Stambaugh, proposes to amend the Separations Act by raising the $4,000 project threshold to a figure of $250,000, subject to adjustments and annual increases. The thought is that smaller public projects will not need to go through the bureaucracy of the Separations Act requirements.

Representative Stambaugh believes “the current threshold amount is far too low and causes public bodies to have to spend taxpayer money on archaic meeting requirements. After all, the original purpose of the law was not to apply to relatively small projects, which it now does.”

House Bill 710 was introduced in March 2021 and is currently pending before the Pennsylvania State Legislature’s Labor and Industry Committee. If passed, it will theoretically make the design-build model an option when less than $250,000 is involved. However, it would do nothing to remove the separate contracting or competitive bidding requirements. Candidly, given that most public projects exceed $250,000 in total costs, House Bill 710 does little to liberate public projects from the bureaucratic restraints of the Separations Act. Further, it does nothing to implement public entities’ ability to go with the more progressive procurement model of design-build. For now, true design-build will not be a viable procurement for public entity projects in Pennsylvania until more significant legislative changes are made.