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Shively v. Belleville Township High School District No. 201

May 10, 2002

JOE SHIVELY, PLAINTIFF-APPELLEE AND CROSS-APPELLANT,
v.
BELLEVILLE TOWNSHIP HIGH SCHOOL DISTRICT NO. 201 AND THE BOARD OF EDUCATION, BELLEVILLE TOWNSHIP HIGH SCHOOL DISTRICT NO. 201, DEFENDANTS, AND KORTE CONSTRUCTION COMPANY, DEFENDANT-APPELLANT AND CROSS-APPELLEE.



Appeal from the Circuit Court of St. Clair County. No. 99-CH-875 Honorable Patrick M. Young, Judge, presiding.

The opinion of the court was delivered by: Justice Rarick

Released for publication.

The plaintiff, Joe Shively, brought an action in the circuit court of St. Clair County against defendants Belleville Township High School District No. 201 (School District), Leo Hefner, in his capacity as the superintendent of the School District, and the Board of Education, Belleville Township High School District No. 201 (Board). Shively's complaint sought equitable estoppel, a preliminary injunction, and a permanent injunction. Shively subsequently added a count for a declaratory judgment against the School District and defendant Korte Construction Company (Korte).

The Board approved a project to renovate Belleville East High School and to construct a new Belleville West High School. Hefner invited five firms to provide construction-management services for the project. Two firms submitted proposals, and each made presentations to School District representatives. Korte was selected as the construction manager. Korte and the School District signed an agreement providing that the construction manager would be an agent for the School District.

During a bench trial, Shively voluntarily dismissed counts I, II, and III of his complaint, and Hefner was dismissed as a defendant. With respect to the remaining count, Shively argued that the construction-management agreement between Korte and the School District was awarded without competitive bidding as required by section 10-20.21 of the School Code (105 ILCS 5/10-20.21 (West 1998)) and was therefore void. Korte responded that a construction-management agreement was not the type of contract which is subject to the competitive-bidding requirements of section 10-20.21 and that such an agreement comes within the professional-services exception contained in section 10-20.21(i) of the School Code (105 ILCS 5/10-20.21(i) (West 1998)).

Doug Sitton, a civil engineer employed by the project's architect, testified that a "construction manager" deals with the construction schedule, cost-estimating, and "constructability," which he explained is the process of evaluating and analyzing how to construct a facility in the most cost-effective way, considering the availability of materials and the owner's schedule. Sitton characterized the services provided by a construction manager as being "more like a professional service."

Brian Braun, an attorney who advised the School District in negotiating the terms of the construction-management agreement with Korte, testified that the construction-management agreement between the School District and Korte expressly recognized that the bidding process set forth in section 10-20.21 applies to contracts for construction, supplies, and materials, but Braun testified that the construction manager does not perform any of the trade contractors' work and does not furnish supplies or materials. Braun testified that Korte was responsible for overseeing the trade contractors' performance but that Korte was not a "constructor" under the agreement. Korte did not have a right to purchase materials.

Lorry Bannes, a civil engineer and a design-and-construction consultant, testified that there are three types of recognized project-delivery systems: (1) the traditional general-contractor delivery system, (2) the construction-manager-at-risk delivery system, and (3) the construction-manager-advisor delivery system. With the general-contractor delivery system, the architect prepares the plans and specifications and the general contractor is then selected by competitive bidding where bidding is required. Under the construction-manager-at-risk delivery system, the construction manager serves as the owner's consultant during the design phase but then becomes a "contractor" by providing the owner a lump sum or guaranteed maximum price to construct the work per the plans and specifications. Under the construction-manager-advisor delivery system, the construction manager remains the owner's agent and adviser throughout the project.

Bannes testified that a construction manager, whether at-risk or as an advisor, provides various services involving professional skill, including cost-estimating, scheduling, "constructability," "value engineering," and life-cycle cost analysis. Bannes described "value engineering" as a comparative analysis of the relative costs and values of different available options. Bannes indicated that a construction manager provides expert advice on such things as how a particular design might impact the schedule, how design details can be handled to take advantage of the relative skills of particular trades, the relative availability of different building materials, and how to properly motivate the affected trades of the construction market to submit bids. Bannes agreed that architects perform construction-management services, but in his experience, more general contractors perform as construction managers than do architects. He did not necessarily think that any general contractor would be up to the task of serving as a construction manager, because it would require a general contractor who has been in the business and looked at competitive bids, knows how to write a contract, is good at supervision, and can share his knowledge in the early stages of design.

Bannes reviewed the School District/Korte agreement and concluded that it was clearly an agency form of agreement. Bannes testified that construction management is regarded as a "professional skill or service" in the construction industry.

After initially rejecting Shively's contention that exception (i) to section 10-20.21 applied only to contracts with individuals and not corporations, the trial court found that the agreement between Korte and the School District was subject to the competitive-bidding requirements of section 10-20.21 and that the professional-services exemption did not apply. The court found that nothing introduced by the parties would warrant a finding of any expertise above that of a general contractor. Accordingly, the court found the contract void.

On appeal, Korte argues that a construction-management contract is not the type of contract subject to the bidding requirements set forth in section 10-20.21 of the School Code and that a contract for construction-management services is exempt from bidding under exception (i) to section 10-20.21 of the School Code.

Section 10-20.21 of the School Code places the following requirement on school boards:

"To award all contracts for purchase of supplies, materials or work[,] or contracts with private carriers for transportation of pupils involving an expenditure in excess of $10,000 to the lowest responsible bidder, considering conformity with specifications, terms of delivery, quality[,] and serviceability, after due advertisement, except the following: (i) contracts for the services of individuals possessing a high degree of professional ...


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