Thursday, August 12, 2010

The Dilemma of Low Bids and Contractor Performance

The Question:  Are public agencies required to award public works construction projects to the low bidder, even if the low bidder has a history of poor performance or a pattern of filing unjustified change order requests and claims?

While there are some tools available to public agencies to help manage the low bid process, those tools must be managed carefully, and even then it may be difficult to disqualify the low bidder.

Not all agencies are authorized to use all of the following tools.  Check your local and state laws to determine if you can use these tools.  The following is a very quick summary introduction to some of the issues involved.

Pre-Qualification:  Under this process, a public agency only accepts bids from contractors who have already gone through a qualifications-based short listing process.  It is often authorized for agencies with specialized work, such as for electrical work.  In theory, it limits the bidding pool only to qualified contractors.

Bidder Responsibility Criteria:  This process is similar to Pre-Qualification except that the review of the contractor's qualifications occurs after the bid submittal deadline instead of before it.  Criteria must be relevant, fair, defensible, and not overly restrictive of the bidding pool.  In Washington State, supplemental bidder responsibility criteria may be used and are outlined in RCW 39.04.350.

References:  Reference checks with previous owners is often a part of a bidder responsibility analysis.  Owners desiring to use references as a means to disqualify a bidder should proceed with caution.  There are often personality conflicts that may have occurred on a previous project that may impact the comments of a reference.  Public agencies should provide bidders who may be disqualified based on reference checks with the opportunity to provide feedback on the comments received.

Performance Evaluation Program:  If implemented correctly, this can be one of the most effective tools for not awarding contracts to contractors with a consistently poor record of performance.  A performance evaluation program should be included in the bidding and contract documents, with clear and relevant evaluation criteria, an appeal process, and how poor performance evaluation scores will be used in making future award decisions.

Think Strategically:  If your agency is facing specific issues about unqualified contractors being awarded projects, it is best to think strategically about the particulars of your situation as well as what is authorized by your state and local laws.  If you would like assistance in thinking through these issues, or in developing a contractor performance evaluation program, please contact me.

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