Wednesday, June 27, 2012

What is the Purpose of a Bid Guaranty?

Most public works construction bids require bidders to submit with the bid a bid guaranty in the form of either a bid bond, cashier's check, certified check or cash.

Question:  What is the purpose of the bid guaranty, and when can a public agency enforce or collect a bid guaranty?

Purpose:  A bid guaranty is required to help ensure that a bidder will honor its bid if they are awarded the project. The bid guaranty is designed to provide a public agency with compensation (typically in the amount of 5% of the bid) for its expenses in the event the low responsible bidder with a responsive bid fails to sign a contract once the project has been awarded to them.

Bid errors:  If a bidder submits a claim of error after the bid has been submitted, they are making a request to be relieved of their obligation for the bid.  If the public agency then accepts the claim of error and allows the bidder to withdraw its bid, the agency would not be eligible to be compensated by the bid guaranty.  

When is a bid guaranty enforceable?  A bid guaranty only kicks in when a bidder is awarded a project and they fail to sign the contract.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Tuesday, June 26, 2012

Read Your Federal Grant Terms

It's great when a public agency receives federal funding for a project that they might otherwise not be able to fund.  However, federal money comes with procurement and contracting requirements.

Consequences of Non-Compliance:  Failure to comply with federal grant requirements may result in:
  • Audit findings from the federal agency providing the funding
  • Audit findings from a state auditor
  • Having to pay grant money back to the federal government
Audit Findings for School District:  In Washington State, the Othello School District No. 147 recently received an audit finding from the State Auditor's Office for failing to comply with various federal procurement requirements.  The District spent $174,417 in construction costs with funding from the American Recovery and Reinvestment Act (ARRA).  The audit found that the District did not comply with the following:
  • Davis-Bacon Prevailing Wage Requirements:  The District did not inform the contractor that federal prevailing wages applied on the project, and did not collect weekly certified payrolls from the contractor and all subcontractors, as required.
  • Suspension and Debarment:  The District did not verify that the contractor was not suspended or debarred from doing business on federally funded projects as required.  Agencies receiving federal funding should check for any contract of $25,000 or more, and print out documentation for the file demonstrating that the contractor (or consultant or vendor) is not on the suspension/debarment list.  
  • Buy American:  On ARRA funded projects, iron, steel, and construction materials must be manufactured in the United States.  "The District did not ensure the Buy American requirement was included in its construction contract with the contractor, and it did not monitor compliance."
Read the terms of your federal (and other) grants and make sure your agency is in compliance.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Monday, June 25, 2012

State Corrects Prevailing Wage Rate for Roofers

The Washington State Department of Labor & Industries published corrections to the previously published prevailing wage rates for roofers working in Thurston and Pierce counties.

New rates effective in mid-July:  The corrections were published on June 14, 2012 and will become effective for any project with a bid opening date of July 14, 2012 or later.  Journey level roofers as well as roofers using irritable Bituminous Materials are affected by the decrease in wages.

More Information:  Click here to visit L&I's website for more information.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Sunday, June 24, 2012

Should Elected Officials Make Consultant Selection Decisions?

Consultant and service contractor selection decisions are typically made by evaluation committees that review proposals or statements of qualifications submitted by firms.  Evaluation committees rate the submissions based on established evaluation criteria.

Question:  What role, if any, should elected officials play in making the final decision of what firm should be selected?

Louisiana's Unusual Practice:  In one of Louisiana's largest counties (called parishes), the selection decision is made by the elected members of the Jefferson Parish Council, who often overrule the evaluation and recommendation of the committee.  In fact, the Parish Council typically defers the decision "to the councilmember in whose district the contracted service will be performed," rather than making decisions based on established evaluation criteria. 

Politicized Process:  This process politicizes the consultant selection decision, raises a host of ethical concerns, and appears to result in a "pay to play" situation in which campaign contributors are awarded contracts.

Critical Report Published:  This controversial process has recently come under criticism.  In May 2012, a private, non-profit and independent research organization published a report evaluating the Parish's selection practices: "Private Services in the Public Interest: Reforming Jefferson Parish's Unusual Approach to Service Contracting."  In investigating Jefferson Parish's consultant selection practices, the Bureau of Governmental Research contacted me to provide input and comments on best practices.

Report Available Online:  The 14 page report by the Bureau of Governmental Research is available online by clicking here.

Executive Summary:  The following is the Executive Summary from the report that does a good job of highlighting the main issues addressed in the report (the headings below are mine to make it more readable):
Abnormal Process:  Jefferson Parish's contracting process for professional and other services stands far apart from norms and best practices.

Legislative Branch Power to Select:  To begin with, it places the power to select contractors with the Parish Council instead of the executive branch.  This approach is abnormal for a government with an elected executive.  It creates a misalignment between powers and responsibilities.  While the responsibility for delivering services and infrastructure rests with the executive branch, the power to select the contractors who carry out much of that work rests with the legislative branch.

Unfettered Council Discretion in Selections:  The misalignment of powers, while problematic, is not the most troubling aspect of the Parish's contracting process.  The most serious flaw is the Parish Council's nearly unfettered discretion in the selection of contractors.  The Parish Council is free to ignore the work and recommendations of the evaluation committees and make its own selections.

Selections Driven by Personal Political Relationships:  This degree of discretion would be troubling on its own, but the problem is grossly exacerbated by the practice of deferring to the councilmember in whose district the contracted service will be performed.  The result is an idiosyncratic process that some perceive to be driven more by personal political relationships than by what makes the most sense for taxpayers. 

Selection Should be Based on Evaluation Criteria:  There is no reason for giving any elected official - whether it be a council member or the chief executive - such expansive power over contractor selection.  Best practices indicate that governments should select the firm that performs best on an evaluation committee's scoring of relevant criteria.
Additional Information:   The following news articles describe the situation in more detail including the negative response to the report from the Jefferson Parish Council.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Training - Road Solutions: Sustainability

Road Solutions: Sustainability (Audio/Web Broadcast)

When:  June 28, 2012 (8:00 a.m. to 10:00 a.m. - Pacific Time)

Where:  Your desk 

Content:  The session will discuss two sustainability rating tools that are available: Greenroads and INVEST (Infrastructure Voluntary Evaluation Tool)

  • Bill Stogsdill, Director of Public Works, City of Fairway, Kansas
  • Freeman Anthony, PE, Project Engineer, City of Bellingham, Washington
  • Jeralee L. Anderson, Ph.D, P.E., LEED-AP, Director of Greenroads Foundation
  • Debbie Hale, Executive Director, Transportation Agency for Monterey County, California
  • Heather Holsinger, Sustainable Transport & Climate Change Team, FHWA, U.S. DOT
  • Travis Rauscher, Design Engineer II, Perteet, Inc.
  • Lisa Reid, P.E., PMP, VP, Senior Program Manager, CH2M Hill, Seattle, Washington
  • Cindy Carlsson, Government Affairs Assistant, Minnesota Department of Transportation
Sponsored by:  APWA (American Public Works Association)

  • $175 (APWA members)
  • $300 (APWA non-members)
Register by: June 27, 2012 by clicking here.

Information:  Click here.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Wednesday, June 20, 2012

Federal Bid Protests Hit New High in 2011

The number of bid protests filed on federal procurements hit a new high in 2011, with 2,353 new cases.

Numbers almost doubled:  This is almost double the bid protests filed a dozen years ago.  In 2000, there were 1,220 protests.

Impact of economy:  As the chart below indicates, the number of protests began rising significantly when the economy tumbled in 2008. 

Chart from article dated 6/15/12: "Bid protesting system helps agencies police themselves," by Michael O'Connell, using Government Accountability Office statistics.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Tuesday, June 19, 2012

Training: Introduction to Public Procurement

4 Day Class:  Introduction to Public Procurement

When:  August 19-22, 2012 (8:00 a.m. to 5:00 p.m.)

Where:  Seattle, Washington

Instructor:  Ed Pabor, CPPO, CDT, C.P.M.
  • Stores Supervisor/Purchasing Analyst for the Wastewater Division at the City of Eugene, Oregon

Description:  This NIGP foundation course will be offered over four days within the context of NIGP's 2012 Forum schedule.  The course is intended for individuals interested in an overview of procurement functions for the purpose of understanding the basic elements that underlie all areas of public procurement. 

  • $650 - NIGP National Members
  • $850 - Non-Members
Information and Registration:  Click here.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Monday, June 18, 2012

Is Previous Use a Valid Reason for a Sole Source Contract?

May a public agency award a sole source contract for professional services based on the fact that the agency previously used the firm?

No:  The Kennewick (WA) School District recently made that argument, but failed to persuade the Washington State Auditor's Office that previous use justified a sole source determination.  The auditor issued an audit finding on the federally funded project. 

Document Sole Source:  The audit finding also cited the District for awarding three other federally funded sole source contracts totaling $131,1903 claiming that the work was specialized and only a limited number of contractors were available.  However, the District did not have documentation demonstrating how they reach their conclusion.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Sunday, June 17, 2012

Space Still Available for 2 Day Public Works Training

Over the next two weeks I will be conducting two training sessions on Public Works Bidding and Contracting, each for two days.  Space is still available for both the Yakima and Ridgefield locations.
  • Yakima:  There are 10 seats available for the class on June 19 and 20, 2012.
  • Ridgefield:  The are 8 seats available for the class on June 27 and 28, 2012.
Sponsored by:  WCIA (Washington Cities Insurance Authority).  Anyone may attend.

Information and Registration:  For the Yakima class, click here.  For the Ridgefield class, click here.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Job Opening: Director, Contracts and Purchasing

Port of Tacoma
  • Position:  Director, Contracts and Purchasing
  • Location:  Tacoma, Washington
  • Closing Date:  Open until filled
  • Salary:  $7,576 to $9,849 per month
  • Job Summary:  This position is responsible for the overall direction of the Port's contracting and purchasing management, including the development and implementation of Port-wide policies and procedures governing contracting and procurement activities, and provides functional direction to employees in those areas.  This position advises and monitors Port departments on training and compliance with established contracting policies and procedures.
  • For More Information and to Apply:  Click here.  
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Thursday, June 14, 2012

Job Opening: Procurement & Contracts Analyst

Port of Tacoma 
  • Position:  Procurement & Contracts Analyst
  • Location:  Tacoma, Washington
  • Closing Date:  June 24, 2012
  • Salary:  $4,488 to $5,834 per month
  • Job Summary: This position has the responsibility for oversight and administration of the procurement phase of contracting to include determination of appropriate procurement method, creation of Requests for Proposals and Requests for Qualifications, attends pre-proposal/bid conferences, addenda coordination, proposal and bid evaluation and contract award.  This position may also be involved in administering contracts for small works and limited public works construction projects.
  • For More Information and to Apply:  Click here.  
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Tuesday, June 12, 2012

Washington Construction Law Training

19th Annual Washington Construction Law Training

When:  September 13-14, 2012 (9:00 a.m. to 5:00 p.m. both days)

Where:  Seattle, Washington (Washington State Convention and Trade Center)

Agenda and Faculty:
  • Federal Construction Law (Bruce P. Babbitt)
  • A View from the State (Karin L. Nyrop)
  • ABC's of Construction Contracting: Creating a Contract You Can Live With (Alan Bornstein)
  • Contracting in Indian Country (Ryan D. Dreveskracht)
  • Washington State Public Works Competitive Bidding and Bid Protests (Arnold R. Hedeen)
  • Permitting and Environmental Considerations (James Lynch)
  • Construction Changes Differing Site Conditions (Douglas R. Roach)
  • Wash Happens When Someone in the Chain Goes Bankrupt? (Jerry N. Stehlik)
  • Discovery Issues in Construction Claims (Andrew L. Greene and Brendan J. Peters)
  • Washington Construction Law (Paul R. Cressman, Jr.) 
  • Claims Against the Design Professional Firm (Stanton P. Beck)
  • Issues and Benefits of Building Green (Jesse O. Franklin, IV)
  • Ethical Considerations for Construction Lawyers (John A. Strait)
  • Insurance in the Construction Industry (J. William Ashbaugh)
  • Lien and Bond Claims; Dealing with Sureties (Alexander A. Friedrich and Kerry Lawrence)
  • Construction Mediation (Christopher J. Soelling)
Sponsored by:  The Seminar Group

More Information and Registration:  Click here.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Monday, June 11, 2012

Washington Begins State Procurement Reform Effort

Under legislation approved this year, the State's Department of Enterprise Services has been charged with developing reforms to update the rules and policies that govern how state agencies buy more than $1 billion of goods and services annually.  

Work groups established:  Seven work groups with representatives from key stakeholders will be meeting weekly from May 14, 2012 to the end of June 2012 to identify areas needing changes and to make recommendations.  The work groups have been assigned to study the following topics:
  • Training
  • Award
  • Sole source contracts
  • Transparency policies, such as posting contract documents
  • Debarment
  • Procurement management guidelines
  • Ethics, cost recovery, cooperative purchasing, convenience contracts, performance bonds, emergency purchases and more
Procurement Reform Advisory Committee:  After the work groups have completed their work, the Procurement Reform Advisory Committee will meet monthly through the fall to review and comment on the recommendations from the work groups, and develop final policies and rules.  The new policies and rules will take effect January 1, 2013.

More information:

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Sunday, June 10, 2012

What Tools Are Available to Resolve Project Disputes?

Due to the nature of public construction projects where changes frequently occur, it's not surprising that there are often disputes.  Traditionally, disputes that are not resolved at a lower level may end up in an expensive lawsuit with an unpredictable outcome.
What does the contract require?  It's important that the contract include clear dispute resolution procedures for identifying and documenting claims for additional compensation that may be due to the contractor.  And it's equally as important that both the public agency and contractor know and understand what these procedures are.
Alternative Dispute Resolution:  If the claims process identified in the contract is not successful in resolving claims, there are a number of tools that can be used to help resolve contractual disputes short of a lawsuit. Collectively, these tools are often referred to as Alternative Dispute Resolution or ADR.  The tools that will be used on a project should be identified in the contract documents.
Partnering:  Partnering is a tool that is used most frequently on larger projects. In partnering, the public agency, contractor, designer, and any other key parties participate in a retreat-like meeting prior to the start of the work.  The agenda for a partnering session may include:
  • Communication protocols
  • Identifying potential risks and problems with the project
  • Strategies to mitigate against project risks
  • Developing personal relationships between team members
The partnering session is conducted in a spirit of cooperation. It’s much easier to try to “partner” with the other parties before tensions rise and relationships become frayed. The hope is that in partnering, relationships will be established to such a degree that it will help the parties to successfully navigate through the project. Often, a professional facilitator is hired for the partnering session. At the end of the partnering session, the participants sign a contractually non-binding agreement summarizing their intent to work cooperatively with one another during the project.

Disputes Review Board: Typically used for larger projects, a Disputes Review Board (DRB) is used during the project to help informally adjudicate disputes between the contractor and owner. Often, the DRB will include three members, one member is appointed by the owner, one by the contractor, and the third member jointly appointed by the other two members.  Once on the DRB, however, their loyalty is not to who appointed them, but to the project and looking objectively at disputes.  Often DRB members are retired contractors or construction managers.  During the course of construction, the DRB members meet somewhat regularly on the job site to review the progress of the project and to become familiar with brewing issues. If a dispute arises, the DRB hears from both sides and makes a decision. It is most effective if the parties have agreed that the decision of the DRB will be binding. This helps from keeping issues from moving onto more serious forms of dispute resolution, such as court.

Project Neutral:  The purpose of appointing a Project Neutral is the same as using a Disputes Review Board.  However, unlike the Disputes Review Board which has multiple members, the Project Neutral consists of just one individual agreed to by all parties.  The Project Neutral is generally a seasoned construction expert.  This individual keeps current with issues on the project, perhaps by attending monthly progress meetings.  They provide a fair and impartial opinion when disputes arise between the contractor and owner, and help the parties in coming to agreement.

Mediation: When a dispute arises, the parties choose an impartial third party mediator - often a construction attorney.  The mediator's role is to help each party understand the position of the other party, and to make recommendations for resolving the dispute.   Mediation is an informal, non-binding tool to bring both parties to the table with the mediator.  The goal is to resolve the issue short of proceeding with a lawsuit. The parties decide whether to agree to the resolution of the dispute as proposed by the mediator.

Arbitration: Arbitration is one step closer to a lawsuit and more formal than mediation. In order for arbitration to be effective, the results of arbitration should be binding on both parties, something that would be agreed upon in the actual contract between the parties. Like a mediator, an arbitrator, who is an impartial third party agreed upon by both parties, hears from both parties about their position. Unlike a mediator, however, who tends to have more separate conversations with each party, the arbitrator’s role is to consider the positions of both parties and render a decision. Arbitrators tend to “split the baby” and come up with a resolution that represents a compromise but doesn’t necessarily address the merits of each case. This is one of the risks in using arbitration. In addition, arbitration is more formal than mediation and may cost almost as much as a lawsuit. Arbitration is conducted in accordance with rules established by an arbitration association such as the American Arbitration Association.

Lawsuit: This is a step to avoid if possible. It can be very costly and may not be worth it financially if the dollar amount of the dispute is smaller (less than the amount of attorneys fees for the lawsuit). In addition, when a case goes to court, it may be heard by a judge or jury with limited construction expertise, and the result may be unpredictable.

Bottom Line: Attempt to resolve contractual disputes and problems at the lowest possible level, and communicate clearly and consistently during the contract with the other party. There’s no substitution for such communications.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Wednesday, June 6, 2012

When Does Piggybacking Violate Competitive Bidding?

In an era of reduced government resources, piggybacking is an increasingly popular tool for many public agencies in the procurement of goods and services.  

What is Piggybacking?  In piggybacking, an agency utilizes the pricing and contracting of another agency that has already procured the same product or service, saving the agency the effort of developing its own invitation to bid and going through a separate solicitation process.

Various rules apply:  Different agencies have different requirement for piggybacking, but generally the agency that conducted the procurement must have both followed their own requirements, and met the procurement requirements of the agency attempting to piggyback off of the contract.  Some agencies require a signed agreement between the agencies.  But not all piggybacking is permissible.  

Scope of work not equal:  In one case, a court ruled that a county's piggybacking of a state's contract violated the county's own procurement code because the county significantly expanded the scope of goods and services that the state had procured (software purchase, implementation, and maintenance).  
  • The state's contract was for $176,200 while the county's was for $711,120.  
  • The state's contract included only 9 software modules, while the county purchased 40 modules.
  • The number of users was significantly different between the state and the county.
  • The time for installation and training was significantly different between the state and the county.
The court challenge was brought by a vendor who was denied the opportunity to compete in the open market for the county contract.  The court noted that:
The County acted arbitrarily and capriciously when it violated the terms of the piggyback provision of its Code in entering into the three agreements.  The agreements must therefore be deemed void and of no effect.
More Information:  Click here for an article from GovPro by Richard Pennington that includes more information about Sarasota County, Florida's attempt to piggyback off of a State of Wisconsin contract for a zoning and permitting tracking system.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Tuesday, June 5, 2012

Salary History for Purchasing and Contracting Positions in the State of Washington

Do you ever wonder how much public procurement and contracting staff at different agencies make?
Salary table:  Starting from January 2011, I've taken the purchasing and contracting job openings that I've publicized on my blog, and included them in a table showing the position, agency, location, and salary.

Find the data:  I've created a separate page on the blog that you can access by clicking here, or by going to the Reference Pages in the lower right hand column of the blog.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Monday, June 4, 2012

Avoiding the Front Page of the Newspaper: Why Ethics Matters

Enduris' Office Building
On May 16, 2012, I was in Spokane, Washington providing training to the Board of Directors of Enduris, a public risk management pool.  Enduris has a policy that its Board be trained annually on ethics. I trained them last year, and I was honored to be invited back again this year. 

Outline of training:  The training lasted a little over an hour, although we could have easily spent more time discussing some of the issues, had the Board's agenda had permitted it.  Here's an outline of the training.
  • Why should we talk about ethics?
  • Public service is a public trust
  • What's so important about appearances?
  • 8 areas of ethical risk 
  • 5 keys to making ethical decisions
  • Strategies for dealing with ethical lapses
  • 7 risks of ethical lapses
  • What ethics laws and standards apply?
  • Resources
8 areas of ethical risk:  The 8 areas of ethical risk that we looked at, primarily through the lens of recent news stories of public agencies who have experienced headline news, were:
  1. Embezzlement
  2. Waste of government resources
  3. Sexual misbehavior
  4. Private use of public resources
  5. Outside employment
  6. Conflicts of interest
  7. Contracting
  8. Gifts
Practical steps:  We talked about the importance of public agencies having a code of ethics, ensuring that all staffed are trained on ethical expectations regularly, and of creating systems and cultures that provide checks and balances with sufficient independent oversight.
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC

Sunday, June 3, 2012

May Public Agencies in Washington Prequalify Contractors?

Are public agencies in the State of Washington authorized to prequalify contractors on public works projects?  

CPARB discussion:  This was a question that was recently the subject of a discussion at the May 10, 2012 meeting of the Capital Projects Advisory Review Board (CPARB).   At issue were complaints filed by contractors against a city with a prequalification process.

What is prequalification?  Under prequalification, a public agency conducts a separate evaluation process to determine which contractors meet specific criteria and are thus able to submit bids.  

What agencies are authorized to prequalify?  In Washington State, only three types of public agencies are specifically authorized in state law to use prequalification:
  • WSDOT (State Department of Transportation) for highway work - RCW 47.28.070
  • Public Utility Districts (PUDs) for electrical work - RCW 54.04.085
  • Cities or towns owning an electrical utility for electrical work - RCW 35.92.350
Are agencies prohibited from prequalifying contractors?  The general interpretation has been that since the Washington State Legislature has specifically authorized only certain types of agencies to use prequalification, that the authority does not exist for other public agencies to prequalify contractors. 

Attorney General opinion:  The issue of prequalification authority was addressed in an Attorney General opinion from 1993 to the University of Washington.  That opinion concluded that the University did not have authority to require that contractors have an apprenticeship program as a prequalification requirement.

How can agencies get qualified contractors?  While the prequalification process prior to bidding is not authorized, public agencies are authorized to utilize supplemental bidder responsibility criteria.  After bid opening, the agency requests the low bidder to submit specified documentation demonstrating that they meet the published criteria. In order to be determined to be a responsible bidder and awarded the project, the low bidder must meet the supplemental bidder responsibility criteria. 

Resources for responsibility criteria: 
  • RCW 39.04.350 addresses supplemental bidder responsibility criteria
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC