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 16. Construction and Other Contracts


The school-aged population of the State of Georgia has soared in recent years. Consequently, many school systems have embarked on extensive construction and renovation projects in order to accommodate the increasing numbers of students. School construction raises many legal issues. First, school systems may finance new school construction through a variety of methods, including directly from local ad valorem tax receipts and the state capital outlays program, through general obligation bond issues, through lease purchase agreements (sometimes divided and sold as certificates or participation), or through special purpose local option sales taxes (SPLOST). Regardless of the source of funding, all public school construction contracts in excess of $100,000 must be publicly advertised and awarded through an open and competitive bidding process.1

Local boards must contract with architects, contractors and construction managers. Those contracts and the disputes arising out of them lead to legal conflict and sometimes litigation. Construction litigation is often time-consuming, costly and leads to unsatisfactory results. Every effort should be made by boards of education and their superintendents to monitor construction contracts and disputes and intervene early with legal assistance to ensure that problems do not turn into lawsuits. This chapter will discuss issues related to construction contracts from funding issues to performance issues. Also discussed will be other legal issues related to contracts which may be entered into by boards of education.

16. 1 What is the first step which a board of education must take in determining how to finance a construction project?
16. 2 What role does the state play in the financing of capital outlay projects?
16. 3 Does the state provide any extra funding for school districts which are experiencing a rapid increase in their student population?
16. 4 For what purposes may a board of education issue general obligation bonds?
16. 5 What is the procedure to issue general obligation bonds to finance a construction project?
16. 5.a What are Qualified Zone Academy Bonds?
16. 5.b How do schools systems qualify for QZABs?
16. 5.c Are there any limitations as to the uses of QZAB proceeds?
16. 6 Does the board of education have the authority to impose a local sales tax and, if so, for what purposes and for what time period?
16. 7 What are the requirements of the resolution calling for a SPLOST?
16. 8 How is the process of calling for a SPLOST referendum handled in a county with more than one school system?
16. 9 What if the SPLOST referendum fails?
16. 10 What happens with excess SPLOST proceeds?
16. 11 Can bonds and SPLOSTs be used together?
16. 12 Does any other approval have to be obtained prior to a bond or SPLOST referendum?
16. 13 May a school district share in the proceeds of a city or county SPLOST?
16. 14 How much discretion does the board have to shift funding from one project to another using bond or SPLOST proceeds?
16. 14.a How may a school use the interest that is earned from SPLOST proceeds?
16. 15 Are there any limits on how much money the board of education may accumulate for construction projects ?
16. 16 May a school district prequalify bidders on a construction project?
16. 17 Must all construction projects be awarded to the lowest responsible bidder?
16. 18 What are the circumstances under which the board of education can refuse to award a contract using state funding to the low-bidder?
16. 19 What is the school district’s potential liability if the board rejects the lowest bidder?
16. 20 What rights does a contractor have to correct a “mistake” in its bid?
16. 21 What are the bonding requirements for construction contracts?
16. 21.a What protection is afforded to the school district by performance and payment bonds?
16. 22 What are the school district’s obligations to confirm the validity of required bonds?
16. 23 Can a school district make changes to a construction project after construction has begun?
16. 24 Does the board of education have to approve every change order?
16. 25 Are there any limits as to how much the project can be altered with a change order?
16. 26 What is a construction manager and how does it differ from a contractor?
16. 27 What are the school district remedies for delays in construction?
16. 28 Is the board of education obligated to pay fees and assessments levied by counties and municipalities?
16. 29 Are there any special rules or safety standards that apply to school buildings?
16. 30 Are the construction contract and the related documents subject to the Open Records Act?
16. 31 What happens if the contractor goes bankrupt, or encounters other financial difficulty during the term of the contract?
16. 32 Is there a limit on the amount of money which can be retained by the board until the contractor has totally completed the project?
16. 33 Is the school district, or its property, subject to liens by subcontractors and suppliers who contend the contractor has failed to pay them?
16. 34 What authority does a board of education have to enter into a lease purchase or installment purchase agreement to acquire new buildings or a multi-year contract to purchase equipment?
16. 35 What is a guaranteed energy savings contract?
16. 36 How does a board of education dispose of property which is no longer needed?
16. 37 Does a board of education have the authority to condemn property?
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