Wednesday, February 12, 2014

Fire District Disputes Audit on Violation of Construction Bid Requirements

A fire protection district in Washington state has disputed an audit finding from the State Auditor's Office that the district failed to comply with bidding requirements for the construction of a training tower. 

Audit findings:  The audit report cited the Spokane County Fire Protection District No. 3 for the following on $186,530 of work on the tower that had a total cost of $637,662:
  • Project split:  The District split the work into smaller projects each worth less than $20,000, which is the dollar amount below which the district is not required to seek competitive bids.
  • District employees doing work:  The District used district employees to perform part of the work which is not permitted for fire protection districts.
District response:  The District responded in writing to the audit as follows:
  • Why was the project split?  The District implies in their response that they used the Small Works Roster for the work, and that splitting a Small Works Roster project is prohibited only "if it is done for the purpose of avoiding the maximum dollar amount of a contract that may be let using the small works roster process [$300,000]."  The District maintained that the reason they split the project was to save money by having its own staff and volunteers do the work.  What the District failed to note and may not understand, however, is that under the Small Works Roster process, competitive bids are still required.  The District's argument is not persuasive.
  • Why did district employees perform some of the work?  The District stated that there was no prohibition on using their employees for the work.  However, unlike other types of public agencies, fire protection districts have no explicit authority in state law to use their own forces for a public works project in lieu of bidding it.  The auditor affirmed their original finding, probably based on the fact that RCW 52.14.110 that governs how public works are governed for fire protection districts requires formal sealed bidding unless the work will cost less than $20,000 or the Small Works Roster process is used.  Under the Small Works Roster process, of course, competitive bids are still required, but they don't have to be sealed bids.
Lessons learned:  Public agencies should:
  • Strategy:  Think strategically about each project and the best method for structuring and bidding the work.
  • Laws:  Be aware of applicable laws governing how public works construction projects are to be bid.
  • Advice:  Seek appropriate advice prior to embarking on a public works construction project, especially if the agency does not normally do such projects and does not have staff who are knowledgeable on applicable laws and best practices.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

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