Sunday, December 18, 2011

Job Opening: Cost Price Analyst (Port of Seattle)

Last week in my holiday greeting blog post, I said I would take a break from blogging until the new year. 

However, the Port of Seattle has just posted a newly created position that for which applications close on December 30th.  The job might be a nice late Christmas present for someone - so I couldn't resist the opportunity to let you know about it.  The Port is recruiting externally for this position and has not identified any internal candidates for the job. 

Port of Seattle
  • Position: Cost Price Analyst
  • Location: Seattle, Washington
  • Closing Date:  Friday, December 30, 2011 (midnight)
  • Salary: Minimum $69,108 to Midpoint $86,366
  • Job Summary:  Perform a full range of complex professional duties related to the analysis of cost elements and overhead rates to achieve fair and reasonable prices for Port services.  Analyze consultant billing rates and cost proposals for reasonableness of costs and compliance with FAR requirements.  Prepare negotiation strategy memos based on research.  Develop training materials related to negotiations.  Create and update Port database of billing rates by classification.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Thursday, December 15, 2011

Merry Christmas!

The holiday season is often accompanied by even more busyness than what we usually experience during the year.  But it would be nice if it were a quieter time - a time to wait and prepare, a time to reflect and rejoice, a time to spend away from work and with family and friends.

And so in that spirit, I will take a break from writing this blog for a couple of weeks.  I know that many of you will also be taking time off over the holidays, and I don't want to clutter your in-box with yet more e-mails to read come the first of the year.  I'll resume writing this blog in early January.  

Until then, step back from your routines and enjoy the sights, smells, tastes, and meaning of this season, savoring each relationship, and remembering that each day we experience is a gift of grace.

Merry Christmas and a Happy New Year!
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Wednesday, December 14, 2011

Inadequate Plans and Specifications Results in Significant Change Orders and Audit Finding

The Public Utility District No. 1 of Klickitat County (WA) contracted with an engineering firm to design the expansion of its landfill gas project, originally estimated at $55 million.  During construction, the District realized that the plans and specifications were incomplete and inadequate in a number of areas.

$12 Million in Change Orders:  As a result, the District negotiated numerous change orders to the construction contract, significantly increasing the contract amount.  The following chart is from an audit report issued by the Washington State Auditor's Office indicating the number and amount of change orders for a couple of the separate contracts that were awarded for the project:


Pricing Change Order Work:  The auditor issued a finding, noting that by executing the change orders, "the District cannot ensure it received the best possible price for these components of the project."  Of course, all change orders are negotiated amounts and not competitively bid, so it is hard to know whether any change order amount is the best possible price.  It is incumbent on public agencies to ensure they have a rigorous process for negotiating change order amounts, consistent with the methodology that should be described in the contract.

Separate Bidding Not Practical:  The District commented that the change orders were executed only after determining that it was "the most cost efficient path for our rate payers," and that the change orders were "very thoroughly reviewed."   The audit report does not include sufficient details, but presumably it would not have been practicable or advisable for the project to competitively bid the work that was not originally specified, since it was probably an integral part of the entire project.

Audit Recommends Careful Review of Plans and Specs:  The main criticism in the audit finding, however, related to the core issue that caused the problem: the lack of adequately reviewed plans and specifications.  The audit recommended that the District ensure "project plans and specifications are detailed enough to allow for accurate and complete bidding."  The District acknowledged the weakness in their approach that that they "need to take additional steps to ensure the completeness of specifications we receive, even from qualified engineers."

Audit Finding:  Click here to read the audit finding from the State Auditor's Office.

Lessons Learned:  The following are some of the impacts of inadequate plans and specifications:
  • Bidders may bid based on different assumptions if the documents are not complete
  • Significant change order amounts that are not competitively established
  • Inability of the agency to meet its project objectives since they are not defined in detail
  • Potential disputes and litigation over additional work
Public agencies have a responsibility to carefully review plans and specifications from architects and engineers to ensure completeness and that the documents meet the agency's objectives.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Tuesday, December 13, 2011

El Paso Adopts Bid Preference Law

The City of El Paso, Texas approved a new law in early November 2011 providing a local preference of between 3% and 5% (depending on circumstances) on construction projects of $100,000 or less.  

To qualify as a local business, a contractor must have an office in the city limits and have at least three full-time employees.

Click here for more information.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Job Transition: John Lynch Announces Retirement

John W. Lynch
John Lynch, long-time Assistant Director for engineering and architectural services in the Washington State Department of Enterprise Services (DES), has announced his retirement effective the end of December 2011.    

Lynch was also the initial chair of the Capital Projects Advisory Review Board (CPARB) and currently serves on CPARB representing general government.

DES was formerly known as the Department of General Administration.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Monday, December 12, 2011

When Bad Things Happen to Bids

Despite the best efforts of public agencies and contractors, sometimes things go awry and there are problems with public works bids.

Sometimes the public agency's bidding documents were less than clear and resulted in a misunderstanding of the scope of work.  Or maybe the bidder just made a mistake in their price.  Rarely, two bidders may submit the same price.

Let's take a look at 8 things that may complicate a public works bid.

1.  Missing Bid Prices: Public agencies frequently request multiple types of prices on a bid form, such as the following:
  • Lump Sum bid
  • Line item bid with unit prices to be applied to estimated quantities
  • Unit prices for change order work
  • Alternate bid items for different materials or methods of constructing the project
  • Additive or deductive bids addressing desired work that will be awarded if there is sufficient funding
In order for the public agency to be able to equitably compare bid prices to identify the low bidder, bidding instructions should require that bidders submit a bid on all items.  If a bidder fails to submit a required bid price, their bid should probably be declared non-responsive and not considered further.

2.  Unbalanced Bids:  According to Seattle construction attorney John Ahlers, "the unbalancing of a bid is the shifting of part of the cost of the work for one element of the work to another element of the work."  Unbalanced bids may result in a final cost to the public agency that is higher than what would otherwise be expected.  Assuming there is language in the bidding documents defining and prohibiting unbalanced bids, an unbalanced bid should generally be rejected as non-responsive.  Click here to read a read blog entry by John Ahlers on unbalanced bids.

3.  Conditioned or Qualified Bids:  In requesting bids, public agencies should require that bids be submitted on a structured bid form, and prohibit the bidder from imposing any conditions, exceptions, or qualifications to the scope of work.  If a bidder does take exceptions to any of the requirements of the bidding documents, or bids on an unauthorized alternative scope of work, the bid should be declared non-responsive.  I've seen letters submitted with the bid form that don't necessarily condition or qualify the bid.  In other words, if the bidder has simply repeated statements that are consistent with the bidding documents, their bid would be responsive.  It is only if the stated assumptions submitted with their bid change any of the requirements of the bidding documents that the bid should be rejected as non-responsive.

4.  Bid Price Conflict Between Words and Numbers:  If a bid form requires bidders to provide the bid price in both numbers and words, and there is a conflict between the two, the bidding documents should have instructions about which takes precedence - usually the words.  Asking for bid prices in both words and numbers can be problematic for bidders who are faced with the challenge of developing their bid price at the last minute.  The last minute preparation of a bid occurs when subcontractors, concerned about having their bid "shopped" for a cheaper price by bidders, don't provide their sub-bids to general contractors until minutes before the deadline.  Many agencies only request the bid price in numbers to provide bidders with the maximum time to prepare a competitive bid and to avoid potential responsiveness issues or conflicts between the words and numbers.

5.  Claim of Error:  A Claim of Error occurs when the low bidder realizes they have made a mistake on their bid and asks to be relieved of their liability for the bid. Bidders make both errors of judgment and mathematical or clerical errors.  Provided that the bidder notifies the public agency in a timely manner of the error (usually 24 or 48 hours after the bid submittal deadline), the public agency has an obligation to review the documentation submitted by the bidder to assess the nature of the error.  Generally, in most cases it's a good idea for a public agency to accept the Claim of Error.  Beginning a project with the contractor losing money is not a good formula for a successful project.  Some contractors will attempt to argue that their bid price should be adjusted to compensate for the error and they should be awarded the project because, even with the correction, their bid would still be low.  Most public works are procured based on the low bid and to agree to a bid price adjustment amounts to bid negotiation, something generally not permitted in public works contracting.

6.  Bid Calculation Error:  On a unit price bid, generally public agencies should have language in the bidding documents noting that, in the event of an irregularity, the unit price prevails.  Sometimes, bidders make mistakes in multiplying the unit price times the estimated quantity, or make a mathematical error in adding up the extended prices.  Bidding documents should include language authorizing the public agency to make mathematical corrections of multiplication or addition errors on the bid form.  After bid opening, the agency should verify the math for all bidders, as an error by one bidder may change the order of who the low bidder is for the project.

7.  Bid is Too Low:   Sometimes, after bid opening, a public agency may be concerned that the low bidder's bid is too low to be able to successfully complete the project.  If the bidder did not make any mathematical errors on the face of the bid form that can be corrected by the agency, and the bidder does not submit a Claim of Error, is is a good practice for the agency to meet with the bidder prior to award.  The purpose of this meeting is to review the scope of work, the agency's assumptions, make sure that the contractor understands the scope of work and the agency's expectations, and that the bidder can successfully complete the project.  If the agency continues to have concerns, they may suggest that the bidder consider submitting a request to withdraw their bid due to an error.  If the bidder continues to insist their bid is reasonable, the agency generally has limited options regarding disqualifying the bidder, as long as their bid is responsive and they have met all established responsibility criteria.

8.  Tie Bids:  Rarely, two bidders will submit the exact same price.  There are a couple of ways to deal with tie bids.  The most common method is for public agencies to include language in the bidding documents describing a random method of selecting the successful bidder - often by the toss of a coin.  Others will include different criteria such as awarding the project to the contractor whose office is closest to the project site.  Regardless of the method used, it should be described in the bidding documents.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Sunday, December 11, 2011

Job Opening: Contracts Specialist 2

Washington Dept. of Social and Health Services
  • Position: Contracts Specialist 2
  • Location: Olympia, Washington
  • Closing Date:  Tuesday, December 13, 2011 (5:00 p.m.)
  • Salary: $3,443 to $4,513 monthly
  • Job Summary:  Provide agency-wide oversight, analysis, and consultation to ensure agency compliance with applicable laws, rules and policies relating to the essential agency functions of contracting, purchasing, and delegated authority compliance.  Act as program specialist within the specialty area of delegated authority compliance. Perform daily compliance review and quality assurance of approximately 22,000 purchase orders annually, issued by up to 500 agency staff.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Workshop: Lean as a Counter-Measure to Major Project Risks for Owners, Designers, and Constructors

Workshop:  Lean as a Counter-Measure to Major Project Risks for Owners, Designers, and Constructors

When:  Wednesday, December 14, 2011 (9:30 a.m. to 2:00 p.m.)

Where:  Seattle, Washington (Mountaineers Club, 7700 Sand Point Way NW)


Will Lichtig
Speaker:  Will Lichtig, Vice-President, The Boldt Company

Description:  Nearly every organization involved in capital project delivery is focused on reducing the many forms of project risk.  There seems to be a very good reason for this, as an unacceptably high proportion of major capital projects seem to encounter risks far different, or to a far greater magnitude, than was expected when the decisions were made to proceed. 

This highly interactive workshop will explore the major sources of project risk and work to identify the underlying root causes from the perspectives of Owners, subcontractors, designers, construction managers, and others engaged in delivering large projects.  The worship will address the degree to which lean practices can be an effective counter-measure to the risks, as well as what additional risks that might be introduced if lean practices are implemented – especially if they are implemented without appropriate care.

Cost:
  • $75 (by December 13, 2011)
  • $85 (at door registration)
Information and Registration:  Click here.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Wednesday, December 7, 2011

The Changing World of Public Procurement and Contracting

The Changing World of Public Procurement and Contracting: Responses to the Global Market and Struggling U.S. Economy 

When:  Wednesday, December 14, 2011 (11:15 a.m. to 1:30 p.m.)

Where:  Seattle, Washington (Rock Salt Restaurant, 1232 Westlake Avenue North)


Outline:
  • The Rising Importance of Relationships
  • The Shift Toward Cooperative Paradigms
  • The Drive for Sustainability
  • The Impact of Technology
  • The Quest for Reducing Costs

Cost:  $32 includes lunch

Registration Deadline:  Friday, December 9, 2011

Information and Registration:  Click here.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Tuesday, December 6, 2011

Free Video Training Online: Turning Good Contracts into Good Projects

On November 2, 2011, I spoke at a public works seminar sponsored by the Seattle law firm of Foster Pepper.  

My topic was Project Management:  Turning a Good Contract into a Good Project.

For those of your who were not able to attend either in person or via the webinar, Foster Pepper has made the video of my speech available online.  Here's an outline of what I talked about:

4 Foundations for a Good Contract
  • Work with the Designer
  • Pick the Right Delivery Method
  • Tune-up Your Bidding & Contract Documents
  • Allocate and Manage Risk
5 Foundations for a Good Project 
  • Pick the Right Contractor
  • Evaluate if a Bid is Too Low
  • Manage the Contract and Project
  • Negotiate Change Orders
  • Document for Audits
View the Video:  To view the 1.5 hour video, click on this link: http://www.foster.com/rss/FP_Podcasts.aspx?mid=16.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Monday, December 5, 2011

More Calls for Local Bid Preference Laws

As the crippling effects of the Great Recession continue to squeeze both the private and public sectors, many public agencies are evaluating whether local businesses should be given a competitive edge when awarding government contracts.

Janelle Rettig
Iowa Official Speaks Out:  The trend toward bid preferences is an understandable response.  Most recently, one Iowa state official bemoaned that fact that the state is preparing to award a $282,816 public works fish barrier contract to a Minnesota contractor, whose bid was only $4,000 less than the second lowest bidder - a contractor from Iowa.  

Janelle Rettig, a commissioner with the Iowa Department of Natural Resources, said that:
"There should be a change in the legislative rules that allow us to award it to an Iowa company within a certain percentage."
Bid Preferences Cost Governments More:  The irony behind bid preferences, especially in an era of government budget cuts, is that bid preferences result in public agencies paying more for goods and services.  In an attempt to award work to local or in-state businesses, government agencies are effectively subsidizing private businesses with the bid preference, even though government budgets are facing record deficits and cuts.

Bid Preferences Stimulate Local Economy:  The argument in favor of bid preferences is that they stimulate the local economy by providing jobs to local residents who spend the money locally, bringing in more tax revenues for government agencies.

More Non-Local Contractors Bidding:  And, of course, government agencies are seeing more bids from contractors outside the area, as businesses seek bidding opportunities wherever they may be found.  

Washington State Completes Survey of Bid Preferences:  The State of Washington recently approved a bid preference law for public works projects.  The state's Department of Enterprise Services (formerly General Administration) has completed the first task assigned by the legislature: survey all the states to find out what their public works bid preferences are.  The survey is now posted online, and DES has until December 1, 2011 to submit the survey and their recommendations on implementation to the legislature.  

Applying the Washington Bid Preference: Once the instructions for applying the new law are approved, DES will notify all public agencies in the state.  Agencies will then apply a percentage increase to the public works bid of an out-of-state contractor in the amount of that state's bid preference.  If a Washington contractor is lower than the increased price of the out-of-state contractor, the Washington firm would be awarded the contract - at their actual bid amount.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Sunday, December 4, 2011

Is Your Bid Bond Really for 5%?

The language of some Bid Bonds limits the amount of the surety's obligation to the difference in the bid amount between the low bid and the second low bid, up to a maximum of 5%.

This limitation of the Bid Bond amount is sometimes in conflict with either state or local regulations that require a bid guaranty in the amount of 5% of the amount of the bid.

5% Bid Bond Required for Some Agencies:  For example, in Washington state, the following state laws for specific types of public agencies requires a 5% Bid Bond on public works projects.  Check your authorizing legislation to determine what you are required to obtain from bidders.
  • Second-Class Cities:  "Each bid shall be accompanied by a bid proposal deposit in the form of a cashier's check, postal money order, or surety bond to the council or commission for a sum of not less than five percent of the amount of the bid..."  RCW 35.23.352 (1)
  • Counties with Population of 400,000 or More:  "No bid may be considered for public work unless it is accompanied by a bid deposit in the form of a surety bond, postal money order, cash, cashier's check, or certified check in an amount equal to five percent of the amount of the bid proposed."  RCW 36.32.235
  • Public Utility Districts:  "Each bid shall be accompanied by a certified or cashier's check, payable to the order of the commission, for a sum not less than five percent of the amount of the bid, or accompanied by a bid bond in an amount not less than five percent of the bid with a corporate surety licensed to do business in the state..."  RCW 54.04.080
  • Water-Sewer Districts:  "Each bid shall be accompanied by a certified or cashier's check or postal money order payable to the order of the county treasure for a sum not less than five percent of the amount of the bid, or accompanied by a bid bond in an amount not less than five percent of the bid with a corporate surety licensed to do business in the state..."  RCW 57.08.050
Competitive Advantage?  If an agency requires a 5% bid guaranty, but accepts a bid bond that is limited to the difference between the low bid and the second low bid, there is an argument that:
  • The bid is non-responsive for failure to provide a 5% bid guaranty.
  • The contractor submitting such a bid bond has an advantage over contractors submitting a certified or cashier's check or cash, who must provide the full 5% bid guaranty.
Practical Tips:  If you are required to obtain a 5% bid guaranty, or if your policies or specifications require a 5% bid guaranty:
  1. Include language in your bidding documents noting that you will not accept any limitation on the 5% amount.  
  2. Review all bid bonds for compliance with the 5% amount.  
  3. Consider developing your own standard bid bond form that you require bidders to use.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Wednesday, November 30, 2011

Personal Use of Government Credit Cards Prohibited

In a June 2, 2011 informal opinion, the Washington State Attorney General's Office provided its analysis on whether a local government official or employee may use a government issued credit card for personal purchases and then reimburse the agency for the cost.

Summary of Opinion:  The Attorney General's opinion summarized its conclusion as follows:
"Under the Washington State Constitution and the laws of this state, included RCW 43.09.2855 and RCW 42.24.115, a local government official or employee may not use a publicly-issued credit card for personal purchases, even if the person pays off the card prior to the date that the bill becomes due."
Auditor's Response:  The Washington State Auditor's Office has issued the following statement in response to the Attorney General's opinion, noting that they will begin enforcing this provision during 2013 for 2012 year-end audits:
"Since we want to make sure local governments hear of this guidance and have time to put procedures in place to comply, we will not hold local governments to this interpretation for the 2011 fiscal year.  We will provide information on this opinion to local governments in various ways.  We will begin to audit and report on this issue during 2013 for the 2012 year-end audits."
In the News Recently:  The Port of Seattle elected commissioners were recently cited in an independent ethics report for having used their port issued credit cards for expenses that were not reimbursable by the port or that were clearly personal expenses.  Click here to read my November 1, 2011 blog entry on this subject.

Do You Have a Policy?  If your agency issues credit cards to employees:
  • Do you have clear policies prohibiting use of the cards for personal use?  
  • Do you regularly monitor charges on the credit cards to ensure they are appropriate government expenses?
  • What are the consequences for failure of employees to use the credit cards appropriately?
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Tuesday, November 29, 2011

Washington Revises Prevailing Wage Policy

The Washington State Department of Labor and Industries has revised its policy on "Filing an Affidavit Form 'On Behalf' of Subcontractor."  

The new policy, dated November 22, 2011, replaces the policy dated August 17. 2009.

Steps and Conditions for Filing by Contractor: The policy describes the steps that a contractor must take before they may file an "Affidavit of Wages Paid" form on behalf of a subcontractor who has gone out of business, is bankrupt, or has refused to file its own Affidavit.  Affidavits must be on file with the public agency awarding a public works project for the contractor and all subcontractors before retainage may be released to the contractor.

What's Different in the Revised Policy?  The major change in the revised policy eliminates requiring the contractor to certify that the workers have been paid the prevailing wages by the subcontractor (something that the contractor may have no basis for certifying).  Instead, the Assumption of Liability Statement which must accompany a hand filled out Affidavit only keeps the language that the contractor agrees to "accept full liability for any unpaid wages owed" by the subcontractor.  There are a few corresponding changes in the policy to address this modification.

Read the Revised Policy:  Click here for a copy of the revised policy.

Obtaining an Affidavit for a Missing Contractor:  L&I's policy does not address what to do if it is the general or prime contractor who has gone out of business, declared bankruptcy, or refused to file the Affidavit.  If you have this situation occur, discuss it with L&I.  In the past, prior to any policy by L&I on the contractor filing an Affidavit on behalf of a subcontractor, I have had the bonding company fill out and sign the Affidavit on behalf of the contractor.  In my opinion, L&I should expand its policy to provide for the surety to file the Affidavit on behalf of the contractor.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Monday, November 28, 2011

President Obama Signs Bill Eliminating 3% Withholding Tax

On November 21, 2011, President Obama signed a measure that repeals a 2006 law tax withholding law.

The president's action caps years of controversy and delays over the implementation of a law that would have required federal, state, and local agencies to withhold 3% of  payments to vendors, contractors, and consultants.

The bill recently passed both the House and Senate with overwhelming bipartisan support. 
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Sunday, November 20, 2011

A Heart of Thanksgiving

It's easy in the midst of the daily challenges and stresses of life to forget.  

It's easy to become consumed by the things we would like to change about ourselves, our finances, our relationships, our nation, and our world.  

And so we forget that we have so much to be thankful for.  On Thanksgiving Day, we deliberately pause to remember the many good things we have to be thankful for - the things we are grateful for.

I have a good friend who has made it a practice to keep a running list of the things she is thankful for - sometimes little things, sometimes big things.  Kimberlee Conway Ireton writes:
This list has filled me: how much I have been given! It has humbled me: who am I to receive such riches? It has changed me: the glass of my life is no longer half empty; it never was.  This list has pointed me again and again to the God of all good things. It has corrected my faulty vision: I am no longer myopic and moping. I can now see my life for what it is: a gift of grace full of gifts of grace from the God of grace.
It's a good challenge for us to develop a habit and a heart of thanksgiving - not just on November 24, 2011, but on every day of the year.  It takes time and a deliberate effort for us to pause each day and remember and give thanks.  Being thankful doesn't make our problems disappear, but it does help us keep life in perspective.

Best wishes to you and your loved ones as you gather on Thursday to celebrate the many graces and gifts in your life - all of the things for which you are thankful.
Blog Note:  Because many of us will be taking time off from work around Thanksgiving, I'll be taking a week long break from this blog.  I'll post again early next week. See you then!
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Wednesday, November 16, 2011

Final Vote by Congress Repeals 3% Withholding Tax

The House of Representatives voted on Wednesday, November 16, 2011, to approve the Senate version of the repeal of 2006 withholding tax legislation.  

3% Withholding Would Have Been Required:  The law would have required all federal, state, and local agencies with expenditures of $100 million or more to withhold 3% of every payment over $10,000 to contractors, consultants, and vendors and send the money to the IRS for payment of income taxes.

Overwhelming Support in Congress:  The vote in the House was 422-0.  The vote in the Senate on November 10, 2011 was 95-0.

President to Sign Law:  The measure now heads to President Obama's desk for his expected signature.

Business and Government Both Pleased:  The final votes in Congress are a welcome relief to businesses and public agencies who have lobbied for years to repeal the law before its effective date of January 2013.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Job Opening: Capital Projects Manager

Washington State Department of Social and Health Services (DSHS)
  • Position: Capital Projects Manager
  • Location: Olympia, Washington
  • Closing Date:  November 21, 2011 at 5:00 p.m.
  • Salary: $59,784 to $78,468 annually
  • Job Summary:  As the principal project manager for assigned capital projects, this position provides comprehensive professional project management services for design and construction projects at any of the Department's 20 institutions and state-owned facilities.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Tuesday, November 15, 2011

Continuing Efforts to Increase Use of Minority Businesses on Public Works Projects

It's been more than a dozen years since the voters of the State of Washington approved Initiative 200 that prohibits the use of preferences in government contracting based on ethnicity or gender.

Contractors and Agencies Seeking Solutions:  Since the 1998 passage of Initiative 200, many minority and women owned businesses have struggled to obtain work on government contracts - especially during the Great Recession.  And many public agencies in the state are wrestling with how to provide opportunities for minority and women owned businesses on public works projects.

Two recent developments illustrate different approaches for increasing the use of women and minority businesses enterprises (WMBE) on public works projects.

City of Seattle's WMBE Inclusion Plan:  In late August 2011, the City of Seattle unveiled a new WMBE Inclusion Plan requirement for public works projects exceeding $300,000.  

Commitments with the Bid:  Bidders must make certain commitments for use of minority and women businesses with their bid.  Those commitments are evaluated through a formula to determine whether the bid is responsive or not. 

Use of WMBE Expert Required:  Bidders must also use an approved "WMBE Expert" who may be an employee of the contractor or a consultant from the list of City approved WMBE Experts. 

More Information:  For more information on Seattle's new WMBE Inclusion Plan requirements, click on the resources below:
WMBE as an Evaluation Factor on Alternative Public Works Projects:  On November 10, 2011, Washington's Capital Projects Advisory Review Board (CPARB) discussed recommendations from its Small Business Task Force.  

Small Business Task Force Recommendations:  The Task Force recommended making changes to RCW 39.10 by adding required evaluation criteria to be used by public agencies when selecting contractors for either Design-Build or GC/CM (General Contractor/Construction Manager) alternative public works projects.  The evaluation criteria would address the contractor's proposal plan for outreach and inclusion of WMBEs on the project, and demonstrate their past history in utilizing WMBEs on public works projects.

Next Steps for CPARB:  CPARB was generally supportive of the concept, but charged the Task Force with re-drafting the proposed changes in state law to address issues raised during the discussion.  The revised language will be considered by CPARB at its December 8, 2011 meeting.  If approved by CPARB, the changes would be recommended to the state legislature for their session that will convene in January 2012.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Update Meeting on Seattle's CSO Reduction Program

Seattle Public Utilities has a $500 million program for reducing combined sewer overflow.  Many of the more than 20 capital projects in this program will be contracted through alternative delivery methods, such as GC/CM.

When:  November 17, 2011 (5:30 p.m. to 8:30 p.m.)

Where:  Seattle, Washington (Rock Salt Restaurant, 1232 Westlake Ave N)


Cost:  $45

More Information and Registration:  Click here.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Monday, November 14, 2011

Job Opening: Contracting Analyst

Washington State Department of Transportation (WSDOT)
  • Position: Contracting Analyst (Tolling)
  • Location: Lacey, Washington
  • Closing Date:  November 30, 2011 at 5:00 p.m.
  • Salary: $50,304 to $65,976 annually
  • Job Summary:  As a Contracting Analyst in the Procurement and Materials Management Office, this position will provide expert analysis, consultation and technical support to all agency programs ensuring compliance with performance based contracting standards.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Oregon Seminar on Alternative Contracting

Alternative Contracting Methods - Make CM/GC Contracting Work for You

When:  November 16, 2011 (7:00 a.m. - 9:30 a.m.)

Where: Portland, Oregon (Buffalo Gap, 6835 SW Macadam Avenue)


Cost:  Free to members; $40 for non-members

Information and Registration:  Click here.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Thursday, November 10, 2011

Senate Repeals 3% Withholding Tax

In a rare and welcome display of non-partisanship, the U.S. Senate voted 95-0 on November 10, 2011 to repeal a 3% withholding tax that was scheduled to go into effect on January 1, 2013. 

House to Vote on Revised Bill:  The U.S. House of Representatives voted earlier on October 27, 2011 to repeal the withholding tax by a vote of 405-16.  But because the Senate added a provision for tax credits for companies who hire unemployed veterans, the revised bill must go back to the House for a final vote before being sent to President Obama, who is expected to sign the measure.

Who Would the Tax Impact:  The withholding tax would have required all federal, state, and local governments with expenditures of $100 million or more to withhold 3% from every payment over $10,000 to contractors, consultants, and vendors.  Business groups and government agencies both voiced their opposition to the negative financial impact of the law.  Some agencies have already begun spending money to change their financial systems to accommodate the requirement.

More Information:  For more information, click here for an article from Bloomberg Businessweek.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Wednesday, November 9, 2011

Reminder: Take the Survey on Cost Estimates By November 18

Thank you if you've already completed the survey on how construction cost estimates are developed and made known to contractors!

There are just five questions to the survey.
  • Fast and Easy:  It should take you just a few minutes to complete the survey. 
  • Closing Date:  The survey will close at 5:00 p.m. next Friday, November 18, 2011.
  • Survey Results:  I will aggregate the results of the survey and share them on my blog.
Thanks for participating!
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

The Importance of Managing a Project According to the Contract

One of the keys to a successful project is to manage it according to the terms of the contract.  While that may sound like an obvious statement, it doesn't always happen.  

Purpose of Contracts:  Instead, once the contract is signed, it is often put on the shelf never to be referred to again - unless there are claims and disputes.  But the contract and referenced provisions represent the agreement between the parties for performance and payment.  It serves as the basis for bidding or negotiation of costs.  It allocates the risk between the parties.  And it serves as the guide for both parties in making decisions and managing disagreements.

Why Contracts Aren't Enforced:  Over the years, I've observed that some public agency project managers are hesitant to enforce contract terms.  I think this happens for a couple of reasons:

Knowing the Contract:  Project managers sometimes don't manage according to the terms of the contract because they don't have a good understanding of the contract.  An agency's legal and procurement/contracting personnel may have developed a strong contract, but if the project manager doesn't know the contract's provisions and the protections it affords the agency, the agency looses a major tool for ensuring a successful project.  Public agencies should:
  • Update:  Regularly review and update their standard contracts.  This process should involve attorneys, procurement/contracting personnel, and project managers - those who will be responsible for actually managing projects based on the contract provisions.
  • Train:  Establish a regular and systematic training program for those who interact with contractors, consultants, and vendors to ensure they fully understand the terms of the standard contract.  
Managing according to the contract is an important part of managing the project.  They go hand in hand.

Keeping the Relationship Professional:  Project managers are sometimes hesitant to enforce contractual terms because of their desire to maintain an effective working relationship with the contractor.  There is a misguided concern that an adversarial relationship will be created with the contractor if the agency enforces the terms of the contract.  So a project manager may not review pay requests before approval, may approve payments that are inconsistent with the rates or terms of the contract, may not require documentation of proposed change order costs, may accept change order costs without review and negotiation, or may approve work that doesn't meet the standards described in the contract.  

The following are some of the consequences of not managing according to the contract:
  • Cost:  The agency may pay more than what was bid, or more than what is authorized by the contract.
  • Performance:  The contractor's performance may not be consistent with the agency's needs as described in the contract.
  • Risk:  The allocation of risk between the contractor and the agency may be shifted by decisions made outside of the contract - something that undermines the integrity of the competitive bidding process and ultimately affects costs to an agency.
  • Audits:  The agency may receive audit findings for not managing the project according to the contract, and not controlling costs.
Risks of Shifting Allegiances:  Establishing a cooperative working relationship with the contractor is important.  But the nature of the relationship is that it should be based on business and contractual terms, not personal or professional friendship.  When public employees begin to shift their allegiance from their agency and the mandates of the contract to the contractor because of a desire to be friends with the contractor, or a hesitancy to confront business disagreements - a dangerous line is crossed.  

Working for a public agency is different than working for a private business.  As steward's of the public's money, public employees have a higher standard for ensuring that the terms of the contract are met. 

Cooperation and Compliance:  It is possible to both cooperate with the contractor and ensure that the terms of the contract are met.  But it takes an understanding of the contract, an understanding of the proper role of the project manager, and a willingness to agreeably disagree with the contractor in order to protect the public's interests.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Tuesday, November 8, 2011

Felony Charges and Arrest Warrant Against Former Seattle School District Employee

Silas Potter, the former manager of the Seattle School District's small business program, was charged with nine counts of felony theft by the King County Prosecutor on October 25, 2011.

Arrest Warrant Issued:  An arrest warrant was issued on Tuesday, November 8, 2011 when Potter failed to show up in court to plead guilty or not guilty.

Contracting Scandal:  Potter, who has since moved to Florida, but may have fled from there, awarded $1.8 million in questionable contracts that were uncovered by the State Auditor's Office.  The fallout from the scandal resulted in the school board firing the superintendent and chief financial officer in March.

2 Others Charged:  Two others who were part of Potter's scheme to bilk the district out of $250,000 were also charged.  They were not school district employees.

More Information:
Checks and Balances:  Public agencies need to ensure they have sufficient internal checks and balances in place, not only in their policies, but in practice, to ensure that public contracting is conducted in a fair, transparent, and honest manner.  Supervisors and managers who are responsible for approving awards and contracts should actually read what they are approving, and be actively engaged in understanding their operations.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Monday, November 7, 2011

Pennsylvania Increases Bid Limit Threshold

Pennsylvania recently approved legislation that will increase the bid limit for purchases made by townships from $10,000 to $18,500, effective January 1, 2012.

Efficiency in Purchasing:  The legislation is seen as an efficiency measure to make it easier for townships to solicit and obtain services for smaller dollar value contracts without as much administrative effort.

Summary of Requirements:  Here's a summary of its impact on dollar thresholds of purchases:
  • Less than $10,000:  Not subject to the state's advertising requirements
  • Between $10,000 and $18,500:  Telephone quotes required
  • Over $18,500: Advertising required
More Information:  Click here to read an article from the Norristown Patch.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Sunday, November 6, 2011

Washington State Seeks to Streamline Procurement

The Washington State Department of Enterprise Services (DES) has been charged by the State Legislature with developing recommendations for changes in how it procures goods and services. 

Legislation Directing Streamlining:  Here's what Section 105 of ESSB 5931, approved this year, directed DES to do:
In order to effect reform and consolidation of procurement practices, the department shall review current state procurement practices, not including public works, and provide a report to the governor with procurement reform recommendations. The department should review national best practices and the procedures used in other states and by the federal government. The department may also review private sector procedures and model codes such as the American bar association model procurement code. The department shall seek input from stakeholders and interested parties. The department shall submit a report to the governor and the office of financial management by December 31, 2011. The report shall include any draft legislation needed to accomplish the report's recommendations.
Recommendations Developed by DES:  After reviewing the various sources mentioned in the legislation, DES has developed a number of recommendations.  Those recommendations will be sent to the governor by the end of the year.

DES Seeks Opinions in Online Survey:  DES is now seeking input on the recommendations by conducting an online survey, seeking input from state and local agencies, public and private sector stakeholders.

Survey Closes November 10, 2011:  The survey, which closes on Thursday, November 10, 2011, can be accessed at the following link:  http://www.surveymonkey.com/s/85MQW6H.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Wednesday, November 2, 2011

Turning a Good Contract into a Good Project

I spoke this afternoon in downtown Seattle at a seminar entitled "Public Works Contracting: How to Get the Best Value from a Weak Economy."  

It was sponsored by the law firm of Foster Pepper PLLC and was attended by almost 50 people from government agencies across the state (plus another more than 30 by webinar).

My topic was "Project Management: Turning a Good Contract into a Good Project."  Here's an outline of my speech:

4 Foundations for a Good Contract
  • Work with the Designer
  • Pick the Right Delivery Method
  • Tune-up Your Bidding and Contract Documents
  • Allocate and Manage Risk
5 Foundations for a Good Project
  • Pick the Right Contractor
  • Evaluate if a Bid is Too Low 
  • Manage the Contract and Project
  • Negotiate Change Orders
  • Document for Audits 
Other Topics and Speakers:  Here are the other topics and speakers:
  • Low Price - Good Value?  Establishing Bidder Responsibility and Performance Capacity (Steve DiJulio)
  • When Low Price is Not Enough - Utilizing Alternative Procurement Methods (Greg Guedel)
  • The View from the Other Side - Contractor Perspectives on Facilitating Project Success (Tom Peterson)
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Tuesday, November 1, 2011

Port of Seattle Cited for Improper Use of Agency Credit Cards

According to an independent ethics investigator hired by the Port of Seattle, all five elected port commissioners improperly charged personal expenses to a Port issued credit card.   Eventually, they each paid the Port back, although some of their payments were delayed by months. 

Apparently, the commissioners were not clear about whether their charges were reimbursable as part of the commission duties.  Most of the items charged were for food, drink, and travel they thought were related to Port business but that were deemed improper.   

More Information:  Click here to read a November 1, 2011 Seattle Times article on the subject.  Also note the citizen comments on the article.

Lessons Learned:
  • Clear Policies:  Have clear policies related to what are reimbursable expenses for elected officials and public employees, and what may be charged to government issued credit cards.
  • Ask Questions:  If you have been issued a government credit card and are unclear about what it may be used for, ask for clarification.
  • Monitor Credit Cards:   If you have agency credit cards, make sure that someone is monitoring their use to ensure that all charges are appropriate and for official business.
  • Training:  All public agencies, including elected officials and employees, should attend required ethics training on an annual basis.  It is critical that public agencies be made aware of and be sensitized to a variety of ethical issues related to their work.  The state of North Carolina requires this type of training.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Minority Business of the Year Awards

The University of Washington's Business and Economic Development Center (BEDC), part of the Foster School of Business, will hold their 2011 Annual Minority Business of the Year Awards dinner in December.

When:  Thursday, December 8, 2011 (5:30 p.m. to 9:00 p.m.)

Scott Armstrong
Where:  Seattle, Washington (Sheraton Seattle Hotel, 1400 6th Avenue)

Cost:  $100 per individual

Keynote Speaker:  Scott Armstrong, CEO of Group Health Cooperative

Information and Registration:  Click here.

Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Monday, October 31, 2011

Survey on Cost Estimates for Public Works Projects

One of the questions that often comes up when I provide training on public works contracting issues is how construction cost estimates are developed and made known to contractors.  

I have developed a survey with just five questions to collect responses from various public agencies on what their practices are.
  • Fast and Easy:  It should take you just a few minutes to complete the survey. 
  • Closing Date:  The survey will close at 5:00 p.m. on Friday, November 18, 2011.

  • Survey Results:  I will aggregate the results of the survey and share them on my blog.

Thanks for participating!
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Sunday, October 30, 2011

Does Decentralization of Procurement Work in Tight Budget Times?

According to one recent estimate, public agencies cutting 35,000 jobs a month as the Great Recession takes its continuing toll.  

Job Cuts in Procurement and Contracting:  As agencies eliminate jobs, the area of procurement and contracting is not exempt.  And yet the work of developing bids and solicitations, negotiating contracts, complying with grant requirements, and administering contracts continues - just with fewer centralized staff.

Impacts of Decentralization:  The economy has forced some agencies to decentralize parts of their procurement and contracting functions by delegating authority to departments who have the direct need for the services.  There are a number of risks associated with decentralization including the following:
  • Increased Bid Protests:  Increased bid protests as inexperienced staff manage the process.
  • Project Delays:  Delays in projects due to lack of familiarity with how to procure goods and services.
  • Audit Findings:  Audit findings by state and federal auditors for failure of agencies to follow applicable procurement regulations.
  • Loss of Accountability:  Unclear scopes of work written by department staff without the benefit of centralized review.  This may result in contractual problems of holding businesses accountable for the work contracted for.
  • Higher Costs:  Higher costs for agencies who no longer have the strategic procurement and contracting experts to help get the best deal for the public agency.
  • Ethical Issues:  Questionable ethical behavior by public sector employees not sensitized to, or aware of, the importance of maintaining a fair and transparent bidding and selection process.
What Work is Decentralized?  Some agencies have decentralized lower dollar value procurements back to departments.  Others have increased use of government issued credit cards as a means to deal with reduced staffing.

Managing the Decentralization:  As the economically driven decentralization continues, here are a couple of actions that agencies can take to help reduce negative consequences:
  • Training:  Provide in-depth training to staff who have been delegated with responsibility for procurement and contracting.  The training should also include training on ethics in public contracting.
  • Procedures:  Establish clear policies and procedures to deal with the new environment.
  • Checklists:  Develop simplified checklists that can help those doing procurement and contracting with knowing how to follow the right steps.
  • Check and Balances:  Ensure there are sufficient checks and balances in place to reduce risks of one person taking inappropriate procurement and contracting actions.
  • Ongoing Pre-Audits:   Establish a process for regular pre-audits by either agency staff or outside experts to ensure the process is working properly, and to help make changes where necessary.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com