CHATTANOOGA, Tenn. (May 12, 2026) – Chattanooga Mayor Tim Kelly and Tennessee State Sen. Todd Gardenhire this year worked together to pass a law that will modernize outdated municipal purchasing rules by giving cities across the state more control over the rising cost of building bridges, tunnels and other major capital projects.
The new legislation, signed by Tennessee Gov. Bill Lee on April 27, will speed up construction timelines, allow more value engineering before projects begin, and help shift more of the burden for cost overruns from taxpayers onto contractors, using tools that have for years been available to other agencies, but not cities.
Cost pressures from inflation, tariffs, labor shortages, and now oil prices continue to affect the cost of construction, and it’s more important than ever for cities to gain visibility into and control over these rising costs, said Kelly.
“Coming from the private sector, the delays and overruns associated with large projects have been some of the most frustrating obstacles I’ve encountered as mayor, particularly since there was little we could do within the constraints of the prior state purchasing law. Every dollar that we spent on an over-budget project was one less dollar available for our parks, roads, and sidewalks, and it’s our residents who pay the price,” said Kelly. “I’m grateful to Chairman Gardenhire, Rep. Scarbrough, Comptroller Jason Mumpower, and everyone who agreed that something had to be done to restore some sanity to our purchasing rules, so that every city in Tennessee can better address our aging infrastructure.”
The bill was sponsored by Tennessee Rep. Richard Scarbrough in the House, and co-sponsored by Chairman John Crawford, Chairman Dennis Powers, and Rep. Antonio Parkinson. In the Senate, it was sponsored by Chairman Gardenhire, and co-sponsored by Lt. Gov. Randy NcNally, Chairman Bo Watson, Vice-Chair Tom Hacher, and Vice-Chair Jessie Seal.
“Taxpayer money is a precious and limited resource, and we must do everything possible to ensure that it is properly used for its intended purpose, especially on large, complex projects,” Gardenhire said of the bill.
Taking effect upon receiving the Governor’s signature, the bill will give eligible cities flexibility to choose either the “construction manager at risk” or “design-build” procurement paths for projects greater than $5 million, or to fall back to existing “design-bid-build” methodology on simpler projects. The law currently applies only to larger cities such as Chattanooga that have a full-time purchasing agent, though smaller cities can be approved by the state comptroller on a case-by-case basis.
The legislation promotes transparency in the purchasing process, requiring cities to publicly disclose their evaluation criteria, selection committee, scores, and all procurement documents. It also provides a mechanism by which contractors that are not chosen may protest the selection decision.
The law is permissive, meaning cities may choose whether to use the new project delivery methods available to them. Chattanooga’s purchasing office will work with the State of Tennessee and City Council on a purchasing methodology that takes advantage of these new tools.
Definitions:
- Design-bid-build — the traditional method in which the city works with designers and general contractors under separate contracts. The contractor typically has little input during the design process, which has already occurred before the city seeks the lowest construction bid. Better for simple or standard projects.
- Construction Manager at Risk — NEW — the city engages a qualified construction manager at a fixed fee in the planning stages of a project to help with estimates and design review, resulting in a guaranteed maximum price. The presence of a contractor ensures that designs are buildable and cost-effective, and gives the contractor confidence to commit to a price on a complex project. Cost overruns are borne by the construction manager.
- Design-build — NEW — the city contracts with a single entity, typically a contractor, which will be a single point of responsibility for both design and construction. The design-builder may work with a team of experts with prior work history on a type of project, streamlining the delivery process with fewer change orders. Aligning design with constructability and cost is often better for complex projects.