On February 14, 2023, Seattle voters passed Initiative 135, creating the “Seattle Social Housing Developer” (“Public Developer” or “PD”) and the initiative was signed into law by Mayor Bruce Harrel on March 1, 2023. With this initiative, voters created Seattle’s newest housing developer. The PD aims to develop, own, and maintain housing in the City of Seattle. In addition, the PD also intends to retrofit acquired properties to increase energy efficiency and bring them into compliance with accessibility standards. Contractors, subcontractors, and suppliers may see this as an opportunity to compete for and build everything from new multi-unit housing to handrail installation projects. This post will explore some of the basics of contracting with a public corporation like the Public Developer and what contractors may want to consider in their business planning.
What is the PD?
The Public Developer is a political subdivision of the State of Washington, like a port or fire district. The Public Developer is not an agency or department of the City of Seattle. In this way, it is like Seattle Public Schools (SPS) because both SPS and the PD operate within the City of Seattle, but have (or will have) their own staff, procurement rules, and standard contracts distinct from the City’s. Like SPS, the PD can also enter construction and supply contracts, sue, and be sued.
At this point, I-135 has passed, but the PD has not been given any initial funding from the City or state and has no employees. How prolific a developer the PD will become remains to be seen.
How will construction contracts be awarded?
Construction, renovation, and repair (outside of ordinary maintenance) are all public works as defined by state law and contracts will be awarded under the traditional design-bid-build process or an alternative delivery method like General Contractor/Construction Management (“GCCM”) or Design-Build. Regardless of the contracting procedure used, all public corporations are required to publicly advertise projects, solicit bids, and have a competitive process.
If the design-bid-build method is used and sealed bids are solicited, bids will be open publicly and a contractor must submit any protest to the public agency within two business days of bid opening. If the GCCM or Design-Build process is used, the agency may establish their own protest procedures and time limits that a protesting contractor must follow.
Whether or not bid bonds are required will depend on the PD’s policies. In Washington, some entities, like sewer districts and port districts, must require bid bonds or guarantees of 5% of the contract amount. This requirement is found in the statute authorizing these districts. The statute authorizing the formation of the PD does not require a bid bond, so whether one is required will depend on the PD’s procurement policies.
The PD will also focus on retrofitting and upgrading existing buildings and may elect to use a small works roster for these projects. Generally, small works rosters can be used for projects less than $350,000. At least annually, government bodies solicit the names of contractors to be added to their small works roster. When a public body has a project, they can send an informal invitation to bid to the contractors on the roster. The public body must award the project to the lowest responsible bidder if the small works roster is used.
Because the City of Seattle and the PD are different entities, their small works rosters and processes may be different. The PD and City may enter an agreement to use a single roster; however, a contractor should not assume it is on the PD’s (or any other entity’s) roster simply because it is on the City’s roster.
What will bonding requirements be?
State law requires contractors on public projects to provide a payment and performance bond and requires public agencies to withhold up to 5% retention. However, if the contract is for $150,000.00 or less, the contractor can request a waiver of the bond requirement in exchange for allowing the agency to retain 10% of the contract amount for 30 days after final acceptance or until all necessary releases from L&I and other state agencies are provided.(cite) If the project is under $50,000.00, the public corporation can waive bond and retention requirements.(cite)
Will prevailing wage be required?
Projects by the PD, including any construction, repair, or alteration to an existing building will likely be classified as “public work.” Therefore, the projects will likely require contractors to pay trade and craft labor the prevailing wage rate, although the PD will have the option to specify a higher rate in the project specifications. Prevailing wages are the hourly wages, overtime pay, and usual benefits paid to the majority of workers in the same trade. Prevailing wages are set by the Department of Labor and Industries.
Contractors and subcontractors on prevailing wage projects must file: 1) a statement of intent to pay prevailing wages; 2) payroll reports at least monthly; and 3) an affidavit of wages paid after the project has been completed.
The federal prevailing wage law, the Davis-Bacon Act, will also apply if a PD project receives over $2,000.00 of federal funding. If this is the case, contractors and subcontractors must pay whichever prevailing wage, either state or federal, is higher.
What protects the prime contractor if the Public Developer can’t pay?
Washington law encourages prompt payment by public bodies by requiring payment of interest on amounts due on contracts for public works. If the public owner cannot pay, subcontractors and suppliers can potentially make a claim against the contractor’s payment bond for unpaid invoices, but the prime contractor’s recourse is less certain.
In the case of a private owner that cannot pay, a contractor may record a lien against the property. Eventually, the unpaid contractor could force the sale of the property and claim a portion of the proceeds to cover what they are owed. However, Washington courts have consistently held that public property cannot be subject to a lien.
Neither the City of Seattle nor the State of Washington is obligated to fund the PD nor are they obligated to ensure the PD can meet its contractual obligations. If an organization like the PD were to become insolvent, the superior court where the public entity operates has the authority to appoint a trustee or receiver to manage and distribute the entity’s property. In other words, the court appoints a third party to take over the operations of the insolvent agency.
However, only the assets of the public entity can be used to satisfy the entity’s liabilities. This means only the assets of the PD, not those of the City or State, could be sold or accessed to satisfy any debts. Therefore, suing for monetary damages alleging a breach of contract for the PD’s failure to pay would also likely be fruitless. This liability limitation applies to many public corporations but may be especially important for contractors to consider when working with a new agency that doesn’t have significant assets or an extensive history.
 Anna Patrick, New ‘Social Housing’ Developer Becomes Official, But When Will It Be Funded?, Seattle Times, Mar. 2, 2023,
 I-135, Section 1, Paragraph A. (https://kingcounty.gov/~/media/depts/elections/how-to-vote/ballots/whats-on-the-ballot/ballot-measures/202302/city-of-seattle)
 I-135, Article II(3)(4)
 I-135, Article III(1)
 RCW 39.04.010, et seq.
 RCW 39.10.330(3); RCW 39.10.360(5)
 RCW 57.08.050(1); RCW 53.08.130
 RCW 39.04.155(1)
 RCW 39.04.155(2)
 RCW 39.04.155(3)(b)
 RCW 39.08.010; RCW 60.28.011(1)
 RCW 39.08.010(3)
 RCW 39.08.010(4)
 RCW 39.04.010(3); RCW 39.04.010(4)
 RCW 39.12.030(1)
 Washington Department of Labor and Industries, Prevailing Wage Law, Pg. 4 (https://lni.wa.gov/forms-publications/f700-032-000.pdf)
 RCW 39.12.015(1)
 RCW 39.12.040(1)
 RCW 39.12.120(2)
 RCW 39.12.040(1)(ii)(b)
 Davis-Bacon and Related Acts, U.S. Department of Labor, https://www.dol.gov/agencies/whd/government-contracts/construction (last visited Mar. 7, 2023).
 WAC 296-127-025, et seq
 RCW 39.76.011(1)
 Estate of Haselwood v. Bremerton Ice Arena, 166 Wash. 2d 489, 500 (2009)
 RCW 35.21.750