Most public agencies are required to award public works projects to the low bidder, and may encounter performance problems with the selected contractor.
There are a number of strategies available to help ensure that the low bidder is qualified, and how to respond if there are performance problems.
Clear Documents: Spending the time up front to ensure that the scope of work is clear can help ensure that all bidders are able to submit realistic bids, and that the low bidder will be successful on the project. Clear contract documents are also an important tool to hold the contractor accountable for performing the work - without unnecessary change orders. It is important for the agency to review the drawings and specifications prepared by outside architects and engineers to ensure they are clear and reflect the agency's objectives. If the agency is developing its own drawings and specifications, it is important to review these documents for internal consistency, meeting objectives, and fairness in the bidding process.
Mandatory Bidder Responsibility Criteria: In Washington State, before a public agency may award a public works project, they must verify that the low bidder meets the mandatory bidder responsibility criteria outlined in RCW 39.04.350. These criteria address basic registration and compliance issues of the bidder. They are there to ensure that the contractor awarded the project is a legitimate contractor who pays appropriate taxes and has not been debarred from doing business in the state.
Supplemental Bidder Responsibility Criteria: In addition to the Mandatory Bidder Responsibility Criteria, public agencies in Washington State may establish additional or Supplemental Bidder Responsibility Criteria that address the qualifications and experience of the low bidder. The implementation of these criteria is governed by RCW 39.04.350. There is a document entitled Suggested Guidelines for Bidder Responsibility that has been developed by the state's Capital Projects Advisory Review Board (CPARB) that provides helpful information for agencies interested in utilizing Supplemental Bidder Responsibility Criteria on public works projects. Other than selected agencies authorized in state law, most agencies in Washington State may not prequalify contractors.
Dealing With a Bid That is Too Low: One of advance signs of a pending problem project is receiving a bid that is significantly lower than the estimate - and significantly lower than the bids of other bidders. If the low bidder does not submit a claim of error to withdraw their bid, it is a good practice for public agencies to meet with the bidder (before award) to discuss the scope of work and ensure that the bidder has a realistic understanding of the project and the agency's expectations. Convincing a bidder with a bid that is too low to withdraw their bid is an important preventative measure that can save the agency a lot of grief later on.
Liquidated Damages: In the event the contractor does not perform the work in a timely manner, the public agency may impose liquidated damages on the contractor for each day past the scheduled substantial completion date that the contractor fails to meet substantial completion. Liquidated damages are not a penalty and represent an assessment of the agency's likely costs for a project that extends beyond the number of days included in the contract. Some public agencies, even though they include liquidated damages in their contract, do not often assess the damages. Liquidated damages are an important tool to help motivate the contractor to complete the work in a timely manner.
Performance Bond: The surety that issued the performance bond for the project can be an important ally for a public agency when there are performance issues with a contractor (poor workmanship or lack of timely performance). The bonding company, by issuing the performance bond, has agreed to stand behind the contractor and guaranties to the public agency that the contractor will successfully perform the project in accordance with the contract documents. Agencies who are experiencing performance problems with a contractor should make it a practice to notify the bonding company so they can work with the contractor to resolve the performance issues. In Washington State, RCW 39.08 requires that a performance bond be obtained on public works projects.
Termination: Terminating a public works contract may be either for cause or convenience, and is typically a last resort of a public agency not satisfied with a contractor's performance. It is important that public works contracts have clear language relating to both termination for cause and convenience.
Performance Evaluations: At the end of each public works project, some public agencies conduct a formal evaluation of the contractor's performance using a standardized form. The regular use of a performance evaluation system may be an important tool in the future to ensure that poor performing contractors are not used in the future (by tying it into supplemental bidder responsibility criteria). Click here for my previous blog entry on 10 key elements of a performance evaluation program.
Summary: These tools and strategies are part of an overall package that can help public agencies in managing public works projects and ensuring that qualified contractors perform well and in accordance with the agency's needs.
Mike Purdy's Public Contracting Blog© 2012 by Michael E. Purdy Associates, LLChttp://PublicContracting.blogspot.com
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