Normally when we discuss the differences between public and private projects, we contrast the mechanics lien process with the bond claim process. However, there are other important differences. Because public projects are funded by taxpayer dollars, it’s important that they are cost effective and that they have been properly awarded. It’s not uncommon for states to pass anti-corruption laws or create rules dealing with transparency in the awarding process, and West Virginia has done just that. West Virginia public projects costing $100,000 or more are now subject to review from the newly minted Ethics Commission under House Bill 2001 which went into effect last month.
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An Ethics Commission has been instituted in West Virginia in order to promote transparency in government. The Commission is responsible for reviewing complaints submitted to their office, promulgating rules, and conducting investigations through its Probable Cause Review Board. Importantly for our purposes, the Ethics Commission will review disclosures of interested parties (more on that in a second) for West Virginia public projects exceeding $100,000.
HB 2001 and West Virginia Public Projects
HB 2001 calls for the disclosure of “interested parties” before the approval of a public project of at least $100,000. Generally, “interested parties” are defined as:
- A business entity performing work under the applicable contract, including sub-contractors;
- person(s) who have an ownership interest of at least 25% in the entity performing work or service under the contract (unless the business is publicly traded); and
- a person or business entity that served as a compensated broker or intermediary to facilitate the contract or to negotiate the terms of the contract with the state agency (not including those performing legal services for drafting or negotiating the contract)
A state agency may not enter into a contract of $100,000 or more without first receiving a disclosure statement of the interested parties from the business entity being contracted. Disclosure statements are not required at the time a bid is made, but the statement must come no later than when the contract is submitted to the state agency for signature and approval.
A supplemental disclosure statement is required within 30 days of the completion of the project. At this point, a business entity is required to disclose any new or differing interested parties not present at the time of the original disclosure.
Content of Disclosure Statement
The business entity must make their disclosure statement in a form prescribed and approved by the Ethics Commission. The disclosure statement will include a list of each interested party (as defined above) that is known or reasonably anticipated. It must also include the signature of the business’ authorized agent that acknowledges the statement is made under oath and at the penalty of perjury. After the statement has been made to the awarding authority, it will be passed along to the Ethics Commission. The Commission will then make the disclosure statements publicly available and publish the statements on its website.
The requirements of an awarding authority are slightly different when that authority is a state institution of higher education. Regardless of whether a business is registered with the State of West Virginia, the higher education institution must require the business entity to disclose interested parties in writing before any applicable contracts are executed. Business entities must update any changes to the list of interested parties on a periodic basis. It’s important to note that for a state institution of higher education, a subcontractor receiving less than $50,000 will not be considered an “interested party.” As with disclosure statements for non-educational institutions, disclosure statements must be signed by an authorized agent under oath and under penalty of perjury.
On or before December 31 of each year, the higher education institution shall provide a report to the Ethics Commission listing all business entities that received more than $100,000 from the institution during the previous fiscal year. The interested parties provided by each business entity must be attached.
This legislation goes a long way to providing transparency on public projects. With required disclosures and publications, the public will be able to rest assured that the authorities in charge of awarding West Virginia public projects are being held in check. Considering communication and transparency are two of the pillars for our construction payment utopia, this legislation should be welcomed with open arms.