Summary
In Arizona, municipalities and special taxing districts, such as community facilities districts, are required to use public procurement procedures in connection with the acquisition and construction of public infrastructure. Arizona law authorizes these governmental entities to procure horizontal construction services pursuant to certain alternative project delivery methods.
However, the statutes authorizing these alternative project delivery methods included a June 30, 2025 sunset. Arizona Senate Bill 1054, recently signed into law, extends the sunset for these alternative project delivery methods until December 31, 2030.
The Upshot
- Arizona Senate Bill 1054 extends through 2030 the sunset of the statutes authorizing Alternative Project Delivery Methods, including Construction Manager at Risk (CMAR), Job-Order Contracting (JOC), and Design-Build.
- For certain projects, these methods offer significant advantages over other project delivery methods and are utilized in a majority of horizontal public infrastructure projects undertaken in Arizona.
- The extension will allow Arizona municipalities and special taxing districts to continue utilizing these favored methods of project delivery for horizontal public improvements.
- The legislation, signed March 29, 2024, by Governor Katie Hobbs, indicates that it will become “effective on the general effective date” of legislation enacted in the current legislative session.
The Bottom Line
This legislative extension ensures the continued availability of essential alternative project delivery methods in Arizona, which have been fundamental in executing construction projects across the state. By extending these provisions, Arizona remains committed to fostering efficient and effective construction practices, ensuring continued progress and growth in its infrastructure landscape.
Ballard Spahr attorneys advise special districts in Arizona and other states as they finance and administer master-planned communities and regional public infrastructure projects. They also advise project lenders in construction and permanent financing transactions with respect to special district matters, as well as underwriters in special district debt offerings.
Arizona's recently enacted Senate Bill 1054 amends Arizona Revised Statutes Sections 34-603 and 34-605 to extend the sunset of statutes permitting municipalities and special taxing districts, such as community facilities districts, to utilize CMAR, JOC, and Design-Build methods in procurement for horizontal construction projects until December 31, 2030. The legislation, signed March 29, 2024, by Governor Katie Hobbs, indicates that it will become “effective on the general effective date” of legislation enacted in the current legislative session.
Municipalities undertaking horizontal construction of public infrastructure must comply with public procurement requirements. Similarly, private developers undertaking horizontal construction in connection with a special taxing district, such as a community facilities district, must comply with public procurement requirements if the developer wishes to obtain reimbursement for its capital outlay pursuant to the district’s development agreement.
The CMAR, JOC, and Design-Build approaches to horizontal project delivery enable municipalities, special taxing districts (such as community facilities districts), and developers financing horizontal infrastructure in connection with such special taxing districts to comply with public procurement requirements in construction contracting, and are fundamental components of horizontal construction projects across Arizona.
Understanding the Methods
- CMAR: The owner of a project contracts separately for design services and construction services. Once the design firm is engaged, the owner brings in the construction manager to consult on design plans, facilitating optimization of the project’s timeline and budget. Upon completion of the design, the project goes out to bid. Because the construction manager has a deeper knowledge of the design requirements, it can make a more competitive bid, often resulting in cost savings to the owner. The owner and the construction manager (or other winning bidder) then enter into a guaranteed maximum price contract, shifting much of the cost risk from the owner to the construction manager.
- JOC: The owner of a project contracts with a pre-qualified contractor through a single procurement process for multiple contracts. Each contract is for a specific type of construction-related service. JOC is typically used for smaller projects and discrete tasks.
- Design-Build: The owner of a project contracts with a single design-builder who serves as the owner’s single point of contract for the project. A guaranteed total price is provided by the design-builder in the early stages of a project based on design criteria from the owner.
The CMAR, JOC, and Design-Build methods are integral tools in public procurements for horizontal public infrastructure projects undertaken by Arizona municipalities and special districts. Prior to the enactment of Senate Bill 1054, these project delivery methods would no longer be available after June 30, 2025. Arizona Senate Bill 1054 addresses these impending deadlines by extending the sunset provisions until December 31, 2030.
This legislative action ensures the continued availability of favored alternative project delivery methods in Arizona.
By extending these provisions, Arizona remains committed to fostering efficient and effective procurement and construction practices, ensuring continued progress and growth in its infrastructure landscape.
Subscribe to Ballard Spahr Mailing Lists
Get the latest significant legal alerts, news, webinars, and insights that affect your industry.
Subscribe Copyright © 2024 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.
This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.