ABSTRACT
Once a municipality or government utility has selected the project delivery system best suited for the municipal utility project that it is procuring, the governing body must turn its attention to the legal issues relating to this decision. For the procurement processes under the traditional designbid-build method (discussed in Chapter 17), the legal framework has been developed over the years, and government officials are familiar with such precedents. If a municipality or government utility chooses to deliver a utility project under an alternative delivery method, it must address legal issues specifically related to such delivery methods. Such issues are different in many ways from the issues
seen in traditional procurements. This chapter will provide government officials and utility managers with a general understanding of the legal, contractual, and business issues relevant to procuring a municipal utility project pursuant to alternative delivery approaches. Specifically, this chapter will (1) discuss the importance of engaging legal counsel familiar with all legal issues that may arise during the course of the procurement; (2) provide a summary of legal procurement authority in 14 selected jurisdictions; (3) identify potential tax-exempt bond financing options that may be available and the corresponding federal tax law-related restrictions when contracting with a private firm; (4) explain various manners in which to secure performance under the contract; and (5) describe some essential elements that should be included in a service agreement between a municipality and a private partner. For the purposes of this chapter, “municipality” refers to city or county governments or special-purpose utility districts, and “alternative delivery methods” refers primarily to design-build (DB), design-build-operate (DBO), and design-build-finance-operate (DBFO) projects.*
As previously noted, in the event a municipality selects an alternative project delivery method to procure a water or wastewater utility project, it must address legal issues specifically related to the chosen delivery method. In many instances, the legal framework for the delivery method is less developed and may be unfamiliar to the government officials involved, as well as to the municipal attorney’s office and local counsel who typically do not practice regularly in the area. The municipality will be well served by also engaging special counsel that practices nationally in water and wastewater utility projects procured using alternative project delivery approaches to work closely with and assist the municipal attorney and any other local counsel engaged by the municipality to provide legal services related to the project.
