Thursday, January 29, 2009

Did the City of University Place Negotiate a Public Works Contract?

The Washington State Auditor's Office has issued a finding that the City of University Place improperly negotiated a public works contract after bid opening but prior to award in order to bring the project in at the budget. The City of University Place disputed the auditor's finding that they violated any law.

The project was a street grading project with an estimate of $670,000. Two bids were received and both were more than double the estimate, in excess of $1.6 million. Prior to award, the City negotiated with the low bidder and awarded a project. The final contract amount was $882,655.

The auditor noted that the City had the authority to negotiate an adjustment to the bid price under RCW 39.04.015 if the low bid did not exceed available funds by five percent, but that the difference between the available funds and the low bid was well in excess of five percent. The auditor was incorrect in citing this law. RCW 39.04.015 only applies to a "state contracting authority," not to municipalities. HB 1200, under consideration by the Legislature now, would expand the authority to municipalities, but they not currently have such authority.

The auditor maintained that the re-negotiated contract resulted in "an entirely different project," that the City could not guarantee that it received the lowest price since the work was negotiated, and that the bidding environment was not equitable as other bidders might have bid on the reduced scope of work.

The City argued that it had authority under the specifications to issue change orders. The auditor responded that the reduction was not done as a change order but through negotiations prior to award. The City also argued that they only deleted certain quantities of work from this unit price bid. The City further argued that the project was materially the same project but just with lower quantities. The auditor was unconvinced by the City's lengthy response to the audit and affirmed the audit finding.

On balance, based on what I read in the audit finding, I think the auditor was correct in their assessment that the work should have been re-bid. The City had no authority to negotiate deletions of quantities and therefore work as part of the award process.

To read the complete audit finding, click here.

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