Maintenance Contract at end of
(from Maine Townsman, January 1990)
by Jo Josephson, Assistant Editor
Winter maintenance of roads by any other name translates into snow plowing and sanding.
While the larger towns use their own year round crews to do it, the smaller towns in Maine, in an attempt to get the job done as cost-effectively as possible, have traditionally contracted the job out.
They still do. At last count, according to a 1989 random telephone survey conducted by the Maine Local Roads Center, about 38 percent of the towns "hired out" their winter maintenance while 57 percent used their own crews and about 5 percent used a combination of both.
A Few Problems Plaguing Towns This Winter
While contracting out may be attractive from a monetary point of view as there is no equipment to buy or crews to maintain, it comes with its own set of potential problems. There is, as they say, no free lunch.
If you doubt it consider the following news reports that appeared in the Maine dailies during December and January.
· In Raymond, the contractor hired to plow the town's roads quit just before a major snow storm, stating among other things that while he had not correctly costed out the job before bidding on it, the town had not provided the sand in a timely manner. The town was fortunate to hire another before the next major storm, albeit at a higher cost.
· In Woolwich, the town broke a contract with its contractor following numerous complaints about the quality of his work following the season's first major snowfall and awarded the job to the second highest bidder.
· In Mt. Vernon, the selectmen said they were forced to seek additional help during a major storm because some of the equipment of the contractor, hired to plow their roads, was off the road or not working. The town paid the additional help from the contractor's account. The contractor threatened to sue.
· In Rome, selectmen fired the contractor saying he was always late in getting started, didn't have the required equipment and had failed to get bonding. Some residents defended him and said that based on his past performances for the town, they objected to the contractor they had hired to replace him.
Problems. Like the weather, they are always with us. But unneccesary ones can be avoided and others can be dealt with if you anticipate them with a contract tailored to your particular conditions and needs.
While most towns have snow plowing contracts, the contracts and arrangements of those towns are as varied as the snowflakes they are designed to plow, as evidenced by the following random survey.
A Sampling of How "Other Towns Do It"
At one end of the spectrum is the Town of New Vineyard (population 607). With 31 miles of backroads in Franklin County, it owns its own plow and sander. It has no written contract with the man who plows its roads.
"It's a handshake kind of a deal," says Selectman Norman Pearson. The town pays its "contractor" $200 a week from November through March whether it snows or not, does not require a performance bond but does require proof of liability insurance.
The town of Temple (population 518), with 21 miles of roads, is located at the dead end of Route 43 just south of New Vineyard. Temple finds it difficult to find any contractor interested in plowing its dead-end hilly narrow roads and so does not want to make it too difficult to attract a contractor, says Selectman Ronald Mitchell.
However, Temple does have a simple three-page contract that contains a clause requiring performance bonding but no clause requiring liability even though the current resident who plows the roads has liability coverage.
Chelsea (population 2,522), with 26 miles of roads in Kennebec County, has begun to tighten up its contract ever since the contractor it had for 16 years retired, says Town Manager Tyler Trott.
As it heads into the future with an abundance of unknown contractors in the area, the town is considering adding a clause requiring performance bonding.
While the current contract is detailed to the point of asking for the names of the drivers and their license numbers, and asks for proof of worker's compensation and a certificate of insurance of at least $500,000, it does not have a termination clause.
St. George (population 1,948), with 30 miles of roads covering four villages in Knox County, used to have a one-page contract that was very general. "It was basically you plow, we pay," says Town Manager John Falla.
Last year the town changed all that and redrafted the contract that the Maine Department of Transportation uses with a dozen or so contractors that plow about 200 miles of state roads.
"We tailored it to our needs," says Falla.
Unlike the state's contract, St. George's three-page contract does not require performance bonding but like the state it does contain a detailed termination clause.
And like the state it currently pays by the mile. But Falla says the town is thinking of going to an hourly rate to make the job more attractive and equitable for both the contractor and the town. "When its a hard year the contractor suffers on the fixed rate; when its a mild winter, the town suffers," says Falla.
Not all towns that contract out do so with private contractors. Some hire out the plowing of all or a portion of their roads to the crews of neighboring towns.
Moose River (population 252) in Somerset County contracts out to neighbor Jackman to plow its 2.93 miles of roads.
Hodgdon (population 1,084) in Aroostook County hires two private contractors to plow its 32 miles of roads and has an informal agreement with the town crews of two neighboring towns for plowing minor sections of its roads.
Mapleton (population 1,895) in Aroostook County shares its town manager and plowing with two other towns: Castle Hill (population 509) and Chapman (population 406).
Key Elements of a Snow Plow Contract
Per mile versus hourly rate?
Performance bonding? Termination clauses?
These are but a few of the important elements you should consider when drawing up or rethinking your current snow plow contract to meet the needs of your community.
The more detail you include in your contract--when to start plowing, what roads to plow, which to plow first, what size sand and equipment to be used, who the contractor is accountable to, what amount of bonding and insurance the contractor should carry, when payment is to be made--the better your chance of getting what you want, says Peter Couglan, co-director of the Maine Local Roads Center, who has sent to more than one town copies of the Maine Department of Transportation's contract to use as a model in drawing up their own abbreviated version.
Although we are in the dead of winter, it is not too early to think about redrafting your next snow plowing contract. The Town of Hodgdon, according to Town Manager David Wittner, puts its snow plowing out to bid as early as April so it can get it into the budget for the June town meeting.
For detailed information on the basics of contracting out for road work, contact the Maine Local Roads Center at the Department of Transportation. Their handbook on construction contracts has many applicable sections for snow plowing and makes for good background reading.
The following elements are taken from MDOT's contract as well as from the contracts of the towns of St. George, Hodgdon and Chelsea. St. George and Hodgdon based their contracts on the MDOT model; Chelsea has been developing its contract based on experiences over the past few years.
Specifications (Performance Standards):
Establish a plowing policy. When, where, and with what equipment do you expect the roads to be plowed.
Some towns like Chelsea include this information in their newspaper advertisement for bids. Chelsea's town manager says it eliminates the fly-by-nights and saves him time.
Others, like St. George, provide several printed pages of specifications, including a detailed list of the roads to be plowed, upon request.
Whatever approach you use, make it clear to all parties what is expected.
For example, the DOT and the Town of St. George require their contractors to start plowing when the snow on the pavement has reached a depth of one-half inch if the snow is wet, and one inch if dry.
Hodgdon requires plowing to begin when snow or slush has accumulated to a depth of two inches.
Chelsea requires plowing to begin when two or three inches of snow have accumulated and to plow off slush and begin sanding whenever necessary or on order of the town manager.
And St. George has a clause requiring its contractor to perform its duties before proceeding to other jobs and another requiring that the contractor's vehicles be located within a ten mile radius of the project.
Who is the contractor accountable to? Obviously the town. But there are different ways to spell this out.
St. George has a clause that states, "The Town's Representative will set the priorities in the maintenance of primary and secondary roads, said priority to be followed by the Contractor."
Hodgdon has a clause that states: "The work shall be done to the satisfaction of the Municipal Officers. The judgment of the Municipal Officers shall be final."
Chelsea's contract states that sanding shall begin when necessary "or on order from the Town Manager." It has another clause that requires written permission from the town before the contractor subcontracts out any part of the job. And another that should backup vehicles be needed to assist in emergency conditions, "those conditions shall be determined by the Contractor and/or the Town Manager."
All towns contacted by the Maine Municipal Association follow the state practice of bids based on a "by-the-mile" rate rather than a "by-the-hour" rate.
While by-the-hour gives you a better chance of getting a better job done, it could be more costly and requires close supervision.
In a year when there is an unusually heavy snowfall or a great number of ice storms, contractors operating on a per mile rate could suffer great losses. In a year when there are few storms, the towns will lose. Some say it all averages out in the end.
This year, St. George, which purchases all the sand and salt used by its contractor, is paying $1,260 per mile, with the payment of the $31,200 contract spread out over a six month period beginning with a 10 percent payment in November, rising to 20 percent for the months of December, January, February and March and tapering off to1 percent in May.
Hodgdon is paying one of its contractors $1,200 a mile, and another $1,148 a mile. Its payment schedule falls on the first of the month beginning in December through April. The payments are all of equal amounts. Under a separate sanding contract, it is paying the contractor $271.90 per mile of road to be sanded.
Chelsea pays its contractor $1,200 per mile and pays equal sums on the 30th day of the month beginning in October and ending in April.
Insurances and Indemnification
Because the contractor is an independent entity and not an employee or agent of the municipality, it would be prudent to spell that out in the contract. But such a statement is no substitute for the liability insurance and worker's compensation insurance the contractor should be required to have and show proof of. The expense is assumed in the bid price.
"Beware the low bid, it may not include insurance costs," says Timothy Wakely of the insurance and bonding firm of Jones-Hoxie. Wakely recommends that the contractor carry worker's compensation insurance, as well as $300,000 each of general liability insurance and automobile liability insurance.
St. George requires liability insurance but does not specify any amount.
Hodgdon has a simple addendum to its contract that states: "Contractor agrees to furnish the town with a certificate of insurance covering Workers Compensation and Employers Liability and further agrees that upon failure to furnish such certificate the Town may withhold from contract payments an amount equal to any amount the Town may be required to pay for such insurance coverage.
Chelsea gets more specific, requiring the contractor to obtain, maintain and produce a certificate of insurance of at least $500,000.
Even if the contractor has the proper insurance, you should also include an indemnity clause, exempting the town from any damages, losses or injuries that could be incurred in connection with the performance of the contract.
More often than not, towns are requiring performance bonding with snowplowing, observes Lauren J. Legare of the bonding and insurance firm of Jones-Hoxie, "They are using it to prequalify a contractor, especially when he is new to them," she adds.
But performance bonding is not the same as insurance, she notes. It is essentially a confirmation, after careful investigation by the bonding company, that the contractor is credit worthy and a guarantee that someone, if not the original contractor, will be there to see that the job is done, she says.
Bonding companies rarely expect their bonds to ever be called upon. But this does happen just as loans are sometimes defaulted.
The value of the bond is that it can make needed resources available in the fastest possible manner and if necessary, even locate a replacement contractor and reasonably assure that the increased cost will be covered by the bonded contractor rather than the town.
While some towns require bonding equal to the contract, many, like the state only require a bond valued at 65 percent of the contract. It usually takes between two to three weeks for a contractor to receive bond, says Ms. Legare.
Premiums are usually around two percent of the bond and are included in the bid price.
A termination clauseyour escape hatch in the event that things are not working outshould be in your contract.
While St. George, following DOT has a clause spelling out the termination procedure in detail, neither Chelsea nor Hodgdon have one in their contracts. Both say they probably should.
Road Maintenance Contract
(The following sample contract is provided here as a baseline contract for you to tailor to your own particular needs. In preparing it, MMA Staff Attorney Joe Wathen drew heavily from contracts used by the DOT and the Town of St. George.)
This contract is between the Town of (referred to as "we" or "our") and (referred to as "you"). When this contract refers to you, it includes your employees and agents. The subject of this contract is winter road maintenance (sanding, salting, plowing).
1. SERVICES: What and When
You agree to remove ice and snow and control ice on the sections of town ways ("roads") listed in the attached list "A." Your duties will run from ___________________to______________________.
2. INDEPENDENT CONTRACTOR
You and your agents and employees, during the performance of this contract, shall act in an independent capacity and not as officers or employees or agents of the Town. Any manpower needed to fulfill the obligations of this contract shall be employed by you and you shall be solely responsible for complying with applicable state and federal laws including but not limited worker's compensation law, employment security law and minimum wage law.
As an independent contractor, you are also responsible for maintaining your equipment in a safe, operable and legal condition.
3. MAINTENANCE REQUIREMENTS
A) You will commence plowing and sanding operations when snow on the pavement has reached a depth of one-half inch if the snow is wet and one inch if dry. Operations will continue until highways are cleared of snow to the outside shoulders. During severe storms or drifting, plows will be operated so as to maintain two-way traffic. Immediately after the extreme conditions have subsided snow will be removed to the outside of the shoulders of the highways. You must have supervisory personnel or radio equipped vehicles situated so that messages of urgency can reach the plowing or sanding vehicles within a half hour period.
B) You will follow the Maine Department of Transportation's methods and precautions of plowing and sanding (copy provided to you). Such methods and practices as excessive speed of plows and disregard of mailboxes must be controlled by you and will be monitored by the Town.
C) We agree to provide sufficient sand and salt for operations required by this agreement. You agree to pay particular attention to the sanding of hills, curves and intersections, and to apply extra sand and salt to such locations when necessary.
D) You will remove compacted snow and ice from the highways, insofar as possible, so that three and one-half feet of pavement will be exposed on each side of the centerline.
E) You will reimburse the Town for the replacement of guard rail, guard rail posts, signs, sign posts or guard posts which are damaged by reason of snow removal operations under this agreement, if the Road Commissioner determines that such damage could have been avoided by you.
F) You will perform required duties for the Town before proceeding to private contracts. Town-owned equipment and sand will not be used by you for private use.
G) The Town's Road Commissioner will set the priorities in the maintenance of primary and secondary roads, said priority to be followed by you.
H) You agree to maintain and make available for your responsibilities under this contract the equipment listed on the attached list "B."
4. PERFORMANCE BOND
You must furnish a Contract Bond, satisfactory to the Town, in an amount equal to 65% of the contract price. (The contract price is $_________________ , so the bond must be for $______________ ). This bond must be obtained by you within 30 days after this agreement has been signed by you.
The purpose of the performance bond is to make money available to the Town in the event that you do not complete part or all of your duties under this contract. That money will be used to get the work completed.
You agree to maintain liability insurance in the amount of $300,000 for personal injury, death and property damage claims which may arise from snow removal or sanding operations under this contract. In addition, you will be required to provide evidence of insurance or financial resources sufficient to satisfy the requirements of the Workman's Compensation Act.
6. BILLS AND CLAIMS
As an independent contractor, you are responsible for all bills for labor, material, equipment and fuel and other items which are incurred in the performance of this contract. The Town will not pay such bills.
7. BREACH OF CONTRACT
If you fail to perform according to the terms of this contract at the time and in the manner specified, that failure shall be a breach of contract.
In the event of a breach, the Town (through its road commissioner or selectmen) shall immediately give oral notice to you. You will then be required to perform within a reasonable time. "Reasonable time" may vary depending on the nature of the breach and road and weather conditions. In the event that you still do not (for whatever reason) perform your duties in the time stated, the Town shall have the following options:
(A) Terminate This Contract: We may terminate the contract by sending you a written notice, stating the reason for termination. You will be paid for all work which is satisfactorily done by that time, but the remainder of the money due you under this contract may be used to obtain another contractor to maintain the roads. Likewise, money from your bond may be used to cover this cost.
(B) Substitution: We may hire a substitute contractor to plow and sand the roads for any period of time we consider necessary. This substitution will be paid with money from your bond. If there are problems obtaining the bond money, substitution will be paid from the remainder of any money due to you (but unearned) under this contract.
(C) The Town may also seek any other legal remedies available to enforce this contract.
You agree to hold the Town harmless from any claim for death, injury, property damage or other loss which may result from your performance of road maintenance under this contract. In the event that such a claim is made against the Town, you will defend the Town, and you will pay any amount (indemnify) for which the Town may be held liable in a legal action for such claims.
9. SUPERVISION AND CONTROL
As independent contractor, you have the right and duty to supervise and control your own employees, agents and equipment.
The Town's road commissioner has the right to inspect road maintenance operations, and notify you of any problems, errors or non-performance. The road commissioner may order that work be done in a satisfactory manner, to be determined by him. He may also determine the priority of roads to be plowed and sanded.
10. NOTICE AND CONTACT
The following persons shall be available and authorized to accept notices (written or oral), calls and orders:
For the contractor:
For the Town:
11. PAYMENT SCHEDULE
The Town will pay a total of $_________________________for your services, in installments as follows:
10% on ___________________________
20% on ___________________________
20% on ___________________________
20% on ___________________________
20% on ___________________________
10% on ___________________________
This schedule of payments may be modified in the event of a breach of contract (see Section 7).
12. AMENDMENT, SEVERABILITY, JURISDICTION
This contract can be amended only by written consent of the Town and you. If any part of this contract is declared by a Court to be void or unenforceable, the rest of the contract continues to be valid and effective. This contract is governed by the laws of the State of Maine.
In witness whereof, the parties or their duly authorized agents execute this agreement on this ____________day of ____________________, ____.
_________________________________Town of ____________________________