Tuesday, May 31, 2011

When Can Public Agencies Collect on a Bid Bond?

Bid bonds are a guaranty provided to public agencies as part of a bid on a public works construction project.  

Purpose of Bid Bonds: Bid bonds serve two primary purposes:
  • No Frivolous Bids:  Establishes a baseline threshold of bidder responsibility, and prevents or mitigates against contractors submitting frivolous bids they do not intend to honor.
  • Covering Agency Costs:  Compensates the public agency for its costs in the event the low bidder fails to execute a contract with the owner after being awarded the project.
Bid Bond Amounts:  Bid bonds are written by a bonding company (surety), for the required percentage of the bid amount, and may also be limited by a dollar amount.  Bidding documents should specify the required amount of the bid bond (or other bid guaranty such as cash, cashier's check, or certified check).  Often, state laws dictate the bid guaranty amount, or federal grant requirements may also dictate a required percentage or amount.

Collecting on a Bid Bond:  If a bidder is awarded the project and then refuses to enter into a contract with the public agency, the agency would be able to collect from the surety the amount of the bid bond.  In my experience, this doesn't occur very often.  Sometimes, a contractor will choose to pay the public agency the amount guaranteed in the bond, rather than have the bonding company pay it, in order to keep their bond rates from increasing.

Claims of Errors and Bid Bonds:  Can a public agency collect on a bid bond if the low bidder has submitted a claim of error on its bid after the bids have been opened?  It all depends.  
  • Accepting a Claim of Error:  If the public agency accepts the claim of error, the bidder is then relieved of their liability or obligation for their bid.  In submitting a claim of error, the bidder is requesting to withdraw their bid, due to an error in the bid that results in the bid being too low for the contractor to perform the work at that price.  In this situation, by accepting a claim of error, the public agency will not award the contract to the bidder, and thus, recovery from the bid bond would not be permissible.
  • Denying a Claim of Error:  If, on the other hand, the public agency refuses to accept the claim of error, awards the contract to the bidder, and the bidder refuses to enter into the contract, then the public agency could recover the amount of the bid bond from the surety. 
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Thursday, May 26, 2011

Memorial Day in a Troubled World

Today, we step back from the world of public contracting to think about the meaning of Memorial Day which we will commemorate on Monday.

President Clinton's 1993 Speech:  The following is the text of the Memorial Day speech that President Bill Clinton gave on Memorial Day, May 31, 1993, at Arlington National Cemetary:

Greetings:  Distinguished leaders of the Armed Services, the Defense Department, the Cabinet, the Congress, the leaders of our veterans organizations here, to all the veterans and their families who are here, and to all those here who are family members of veterans buried in this cemetery or in any other place around the globe.  And to my fellow Americans:

A Day to Honor:  We come together this morning, along with our countrymen and women in cities across the land to honor those who died that we might live in freedom, the only way that Americans can ever truly live.  Today we put aside our differences to better reflect on what unites us.

What Unites Us:  The lines so often drawn between and among us, lines of region or race or partisanship, all those lines fall away today as we gaze upon the lines of markers that surround us on these hallowed hills.  The lines of difference are freedom's privilege.  The lines of these markers are freedom's cost.

A Shared Experience:  Today Americans all across our land draw together in shared experience and shared remembrance.  And whether it is an older veteran in Florida, or a teenager in New Mexico, or a mother in Wisconsin, all today will bow their heads and put hand to heart.  And without knowing each other, still we will all be joined in spirit, because we are Americans and because we know we are equal shareholders in humanity's most uplifting dream.

The American Flag:  Today, as we fly the American flag, some will recall the pledge we began to recite daily as youngsters in grade school, with solemn faith and awkward salute; some of us even before we learned the difference between our right and left hands.  Others will remember the flag waving over public gatherings, large and very small.  But on this day, in this serene and solemn setting, conscious of the past, conscious, too, of the perils all too present, what we see most vividly in that flag are the faces of American soldiers who gave their lives in battle; and the faces of this generation of young servicemen and women, very, very much alive, still training and preparing for possible conflicts tomorrow.

Inheritors of a Sacred Trust:  From the first militiaman downed at Lexington to today's rawest recruit, the flag unites them, soldiers living and dead, and reminds the rest of us that we are all the inheritors of a sacred trust.

Keeping America Free:  It is with that flag and that trust in mind that we resolve this May morning to keep America free, strong, and proud.  We resolve in this era of profound change and continuing peril to be ever vigilant against any foe that could endanger us, and against any undercurrent that might erode our security, including the economic security that is the ultimate foundation of our nation's strength. We resolve, as well, always to keep America's Armed Forces the finest in the world.  And we resolve that if we ask them to fight in our behalf, we will give them the clear mission, the means, and the support they need to win.

Honoring Veterans:  In honoring those who died in the defense of our country, we must never neglect to honor as well our living American veterans.  The nation owes a special debt to the millions of men and women who took up posts at home or abroad to secure our defenses or to fight for our freedom.  Because of what they have done for us, their health and well-being must always be a cause for our special concern.

POWs and MIAs:  Here by the Tomb of the Unknown Soldier, we renew our nation's solemn pledge also to the POW and MIA families from all wars; a pledge to provide not just the prayers and memorials, but also to the extent humanly possible to provide the answers you deserve.

No More Forgotten Wars:  And we vow, with the new Korean War Memorial project finally underway, that no future conflict, if conflict there must be, must ever be regarded as a forgotten war.

The Unknown Soldier:  The inscription on the Tomb of the Unknown Soldier says that he is -- quote -- "Known only to God."  But that is only partly true.  While the soldier's name is known only to God, we know a lot about him.  We know he served his country, honored his community, and died for the cause of freedom.  And we know that no higher praise can be assigned to any human being than those simple words.

Defending and Preserving Freedom:  Today we are at peace, but we live in a troubled world. From that flag and these, our honored dead, we draw strength and inspiration to carry on in our time the tasks of defending and preserving freedom that were so nobly fulfilled by all those we come here to honor in this time.

God’s Blessing:  In that effort, and in the presence of those buried all around us, we ask the support of all Americans in the aid and blessing of God Almighty.  Thank you very much.
Note:  I've added the headings to make the speech more readable.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Wednesday, May 25, 2011

CPARB Makes Appointments to Project Review Committee

Washington State's Capital Projects Advisory Review Board (CPARB) appointed nine members to the Project Review Committee (PRC) at their May 12, 2011 meeting.  Members are appointed within specific constituency groups.  

The PRC reviews and approves applications from public agencies in the state who are interested in using the alternative public works delivery methods of Design-Build and GC/CM (General Contractor/Construction Manager) in accordance with RCW 39.10.

The following individuals were appointed:
Bill Yarwood
(Higher Education)
Central Washington University, Director of Facilities, Planning and Construction
Shasta McKinley
WindWard Environmental, Staff Engineer

Darron Pease
Pease & Sons, Inc., Vice-President

Kevin Sutherland
Commercial Floor Distributors, Inc., Owner

Dan Chandler
(Construction Manager)
OAC Services, Inc., Managing Principal

Dan Seydel

Platinum Group, LLC, Owner
Kristen Betty

KBA Construction Management, President
Linneth Riley-Hall
(General Owner)

Sound Transit, Construction Contracts Manager
Penny Koal
(General Administration)
South Puget Sound Community College, Dean of Facilities, Planning, and Operations

Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Training: Fundamentals of Construction Contracts

Fundamentals of Construction Contracts: Understanding the Issues

When: Thursday, June 30, 2011

Where: Seattle, Washington (Washington State Convention Center, 800 Convention Place)

  • Significant Contract Clauses - Michael H. Ferring, Partner in the law firm of Ferring & DeLue LLP
  • Issues for Owners, General Contractors and Subcontractors - James P. Wagner, Partner with Cairncross & Hempelmann, P.S.
  • Current Trends Affecting Construction Contracts - Edward “Ted” R. Coulson, Attorney with Foster Pepper PLLC in Seattle and is chair of the firm’s Construction Group
  • Spotting, Shifting and Avoiding Risk - Geoffrey P. Chism (Moderator), General counsel to Tri-State Construction, Inc.
  • Damage Calculations and the Effects of Contract Provisions - Heather L. Carr, Shareholder at Stafford Frey Cooper, PC
Sponsored by: Lorman Education Services

$359 (registration)
$458 (registration & CD)

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

Tuesday, May 24, 2011

Washington State Adopts Bid Preference Law

Under the terms of legislation approved by the Washington State Legislature and signed into law on May 12, 2011 by Governor Chris Gregoire, Washington joins a number of states and local jurisdictions across the country in providing a bid preference for resident contractors on public works projects.

2SSB 5662, which will become effective on July 22, 2011, has the following provisions:
  • Survey:  Requires the State Department of General Administration (GA) to conduct and survey of other states with bidding preferences on public works projects.
  • Report to Legislature:  Requires GA to report to the Legislature on the results of the survey and their recommendations to implement a bid preference for Washington contractors.
  • Reciprocity:  Requires GA to adopt rules to implement procedures to implement reciprocity provisions for public agencies in the state.  Under the terms of the reciprocity concept, if "a bid is received from a nonresident contractor from a state that provides a percentage bidding preference, a comparable percentage disadvantage must be applied to the bid of that nonresident contractor." 
  • Effective Date:  The reciprocity bid preference will not take effect until GA issues rules or procedures to implement it.
  • Resident Contractors:  The distinction between a resident vs. non-resident contractor is whether the contractor has "a physical office located in Washington."
  • Federal Requirements:  If the bid preferences required by the new law conflict with federal requirements that are part of federal grants, the terms of the federal provisions will apply instead of the reciprocity requirements.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Sunday, May 22, 2011

The Risks of Piggybacking

The practice of "piggybacking" on another agency's bid solicitation can save money by eliminating a redundant requests for bids, but also has its share of pitfalls.

The Washington State Auditor's Office recently issued a finding against the Whatcom County Fire Protection District No. 8 for failing to properly scrutinize a piggybacking purchase and for improperly engaging in a sole-source purchase.

Piggybacking: The District bought over $170,000 of firefighter breathing apparatus and related equipment using a piggybacking agreement, but didn't adequately ensure that the lead agency whose solicitation they used had followed bid laws. The Auditor noted that when using piggybacking, the following conditions must be met by the entity using another government's solicitation:
  • Award meets its own bid requirements.
  • Lead government advertised in accordance with its own statutory requirements.
  • Lead government posted the bid or solicitation notice on the website established and maintained by a government, purchasing cooperative or similar service provider.
  • Lead government’s request for bids allowed for the contract to be used by more than one local government.
Sole-Source Purchase: The District also spent over $12,000 on other equipment that was only available from one vendor. While competitive bidding can be waived if there is genuinely only one vendor for a purchase, the Auditor found that the District "did not take the required steps to declare this a sole-source purchase," including formally passing a resolution.

Practical Tips: Any time the full competitive bidding process is abbreviated or bypassed, extra care must be taken. Make sure you and your agency's procurement staff understand the limitations the law places on alternative procurement methods, and the steps that must be taken if such a method is used. This often involves factual findings about the situation, a formal decision to use an alternate procurement method (possibly including a resolution passed by the agency's governing body), advertising properly, and documenting every step of the process. Remember the goal of being a good steward of public money and getting the best value for taxpayer projects.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Thursday, May 19, 2011

Ethics, Appearances, and Conflicts of Interest

On Thursday, May 19, 2011, I provided ethics training in Spokane, Washington for the Board of Directors and staff of Enduris, a public risk management pool. 

The title of my talk: "Avoiding the Front Page of the Newspaper: Ethics, Appearances, and Conflicts of Interest."

Here's the outline of the training:
  • Why Should We Talk About Ethics?
  • Ethical Responsibilities
  • Public Service is a Public Trust
  • 5 Keys to Making Ethical Decisions
  • What's So Important About Appearances?
  • Strategies for Dealing with Ethical Issues
  • 5 Risks of Ethical Lapses
  • Is It a Conflict of Interest?
  • What Ethics Laws and Standards Apply?
  • Resources
Please contact me if you'd like more information about having me provide this training for your agency.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Wednesday, May 18, 2011

U.S. Postal Service Audit Reveals Errors in Contract Management System

Software-based contract management systems serve a critical role in the efficiency, accuracy, and analysis of the contracting processes. However, a system that is poorly designed or unfamiliar to its users can introduce unreliable data, jeopardizing the system's usefulness - to say nothing of any decision-making that relies on its accuracy.

Numerous Errors: The U.S. Postal Service recently underwent an audit by its Office of Inspector General, which found pervasive errors throughout its primary contract management software. The audit focused on the Contract Authoring and Management System (CAMS), which holds nearly three quarters of USPS contracting actions. Of the 139 contracting actions the audit examined for accuracy across nine "critical" data elements, all but two contained at least one error - and 60% had three or more errors.

Risks of an Off-The-Shelf System: The audit found that as an off-the-shelf system CAMS "is not specifically tailored to the Postal Service’s contracting practices." Of the errors identified in the audit, 73% were due to "system design limitations" and the remainder were employee errors (many caused by inadequate CAMS documentation and training). The primary corrective measures mentioned in the audit focused around customizing the system to fit USPS contracting practices, providing more consistent employee training, and developing processes and policies for how data is entered into the system.

Practical Tips: Software contract management systems are an important tool, but like any other tool they require proper use:
  • Fit the System: Make sure the contract management system conforms to agency contracting policies and procedures. Often, systems will require some customization to make them work effectively with unique requirements or processes.
  • Develop Policies to Ensure Accuracy: It's not enough to have a system in place - to maintain accurate and complete data, there must be clear roles and responsibilities for entering, validating, and reviewing data.
  • Employee Training: All employees who will be using the system should receive training on its proper use.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Job Opening: Contracts Specialist 1 (closes May 19)

Liquor Control Board (Olympia, Washington)
  • Position: Contracts Specialist 1
  • Location: Olympia, Washington
  • Closing Date:  Thursday, May 19, 2011 at 11:59 p.m.
  • Job Summary:  This position is responsible for administering and maintaining one time purchases and term contracts between the Liquor Control Board and private sector companies.  Also responsible for facilitating inter-agency agreements between state agencies and private vendors for a wide variety of goods and services.
  • Salary: $3,063 to $4,014 per month
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Tuesday, May 17, 2011

Who is the Low Bidder? -- Deciding Between Tied Bids

While it doesn’t happen very often, occasionally public agencies receive identical low bids for a project.  How should an award decision be made?

Check the Requirements:  The first thing to do is assess whether there are any applicable requirements that would control how to determine the successful bidder.
  • Are there any applicable state laws that apply to your type of public agency?
  • If the project includes federal funds, are there any applicable federal regulations?
  • Are there any applicable procurement and contracting policies for your agency?
  • Do the bidding documents for the project address how to handle a tied bid?
Resort to Chance:  In the absence of any requirements or policies, the best strategy for making a decision, from my perspective, is to flip a coin, or use some other method of chance.  Establish a procedure of who will flip the coin, who will call it, etc.  Then discuss the procedure with the bidders, put the procedure in writing, and have both bidders sign a statement agreeing that the coin flip procedure is a fair one for determining who the agency should award the project to.  This helps reduce the risk of a protest.

Ask for Revised Bids:  Another strategy, although not recommended, would be to ask the tied bidders to submit new prices by a specified deadline.  Some of the negatives associated with this approach include the following:
  • Bidders may end up bidding below what their costs actually are in order to get the project, which may result in more requests for change orders as the contractor attempts to make up for a low bid. 
  • Other bidders might protest, arguing that they should be given the opportunity to also submit a revised bid price.
  • This approach essentially amounts to bid shopping by the public agency and begins to look a lot like negotiation of a bid, something generally not permitted in public bidding. 
Re-Bid the Project:  A public agency always reserves the right to reject all bids and re-solicit for new bids.  However, the prices submitted by bidders may be artificially low on a re-bid as bidders try to beat the low number, which may result in prices below actual costs, and result in increased change orders.

Select Based on Qualifications:  This could include the safety record of the bidders, their experience in performing similar work, or the satisfaction with previous customers.  The downside of this approach is that it is much more subjective, and is much more subject to protest, especially since the process was not laid out and agreed to ahead of time by the bidders.

Practical Tip:  Establish a process ahead of time for breaking a tie bid, and include it in your agency’s adopted procurement and contracting policies and procedures and in your bidding documents.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Monday, May 16, 2011

Read the Terms of Your Federal Grant

If you work for a public agency and receive any federal funding for any of your projects, make sure you carefully read and comply with the terms of your grant.  Obtaining federal funding brings with it a host of requirements.

The failure to comply with a number of common federal requirements on public works construction projects often results in audit findings.
  • Federal Prevailing Wages (Davis-Bacon Act).  The Nespelem (WA) School District No. 14 was recently cited by the Washington State Auditor's Office for failure to notify contractors that federal prevailing wages applied to three construction projects.  The School District also did not collect weekly certified payrolls from the contractor and all subcontractors.
  • Federal Debarment Check:  The Sumner (WA) School District No. 320 received an audit finding from the Washington State Auditor's Office for failure to verify that a vendor was not debarred under federal requirements.  While the District was aware of the requirement, it did not have adequate internal controls to ensure compliance when they purchased $120,878 of textbooks with funding through the American Recovery and Reinvestment Act (ARRA).
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Job Opening: Procurement Coordinator

InterCity Transit (Olympia, Washington)
  • Position: Procurement Coordinator
  • Location: Olympia, Washington
  • Closing Date:  Friday, June 3, 2011 at 4:00 p.m.
  • Job Summary:  Develop and implement procurement project activities from concept to completion; create processes and procedures for bids, qualifications, and proposals.
  • Salary: $55,661 to $75,150 per year
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Sunday, May 15, 2011

IRS Delays 3% Withholding Requirement Another Year

It's not the outright repeal many are hoping for, but it is at least a brief reprieve: last week the IRS released the final regulations for the upcoming requirement that government agencies withhold 3% of most payments, and it included a surprise provision delaying the starting date a year - to January 1, 2013.

Time Required to Implement Regulations: For over two years, the IRS has been accepting public comments on their proposed regulations, and considered these comments in the formulation of the final rules. According to the IRS, "numerous commenters indicated that an extended period of time following the issuance of final regulations would be necessary" to fully implement those regulations. Sensitivity to these practical concerns prompted the one-year extension of the date the rules take effect.

Second Delay: This is the second time the effective start date of the legislation has been extended: withholding was originally slated to begin on January 1, 2011, but in 2009 Congress passed an extension which put off implementation until January 1, 2012.

Existing Contracts: Contracts that already exist on January 1, 2013 (and aren't changed significantly after that date) will not be subject to the 3% withholding requirement during 2013. However, beginning on January 1, 2014, all applicable payments will be subject to withholding, regardless of the contract's date.

Ongoing Repeal Efforts: The intention behind this latest delay by the IRS is to give businesses and governments enough time to prepare for the administrative, policy, and cash-flow challenges of the new law. Many, however, hope that it will also offer more time for a full repeal of the law by Congress. There are a number of repeal efforts currently pending:
  • S. 89 and S. 164 - similar Senate measures, both of which have been in the Committee on Finance since January
  • H. R. 674 - House bill (similar to the ones in the Senate) that has been in the Committee on Ways and Means since March, and has been steadily adding cosponsors in the mean time (it currently has 116)
The main obstacle to repeal is money. While the actual financial impact of the withholding (and even whether it will be positive or negative) is the subject of much debate, the official projections by the Joint Committee on Taxation from 2006 show nearly $7 billion of revenue over the first six years. To offset the uncertain costs associated with repeal, S. 164 would rescind $39 billion of discretionary funds that have been appropriated by various agencies but which are still unobligated.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Wednesday, May 11, 2011

Learn About Government Contracting and Business Opportunities

Vendor Education Seminar in Washington State

When: Wednesday, June 8, 2011 (8:30 a.m. to 2:45 p.m.)

Spokane, Washington (Spokane Convention Center, 334 W Spokane Falls Blvd.)

Guest Speaker: Brian Sonntag, Washington State Auditor

Description: The seminar will feature training to help vendors successfully bid on government contracting opportunities. It will help businesses succeed in navigating state rules, regulations and services. It will also offer tips for bidding on the billions of dollars that public agencies spend annually for goods and services.
  • Learn about contracting opportunities throughout the state
  • Meet with people who facilitate the contracting process
  • Network and initiate relationships for future partnering
  • Learn how the contracting process works for government
  • Gather important resource information that can help your company thrive
Sponsored by: Washington State Department of General Administration

Cost: $50

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

Tuesday, May 10, 2011

4 Key Tools to Obtain Qualified Subcontractors on GC/CM Projects

In Washington State, GC/CM (General Contractor/ Construction Manager) is one of three alternative public works contracting procedures that may be used for certain public works construction projects in lieu of the traditional low bid, or Design-Bid-Build, process.

Under GC/CM, all construction work must be publicly bid to subcontractors by the selected contractor (the GC/CM) and awarded to the low bidder.  In order to help ensure that the subcontractors are qualified, there are four key tools that RCW 39.10 describes that may (or must) be used:
  • Prequalification:  Officially known in state law as "subcontractor eligibility to bid," a GC/CM and public agency may essentially prequalify which subcontractors may submit a bid on specific subcontract bid packages.  To use this process, a public hearing addressing the intent to prequalify subcontractors must be held along with the proposed criteria, which may be modified based on feedback received at the hearing.  To utilize this process, the GC/CM and public agency must make a determination that doing so would be in the best interest of the project and critical to the successful completion of the subcontract bid package work.  A Request for Qualifications is then advertised and qualifications are received and evaluated based on the established criteria.  Only those subcontractors meeting the criteria and/or threshold number of points established in the RFQ are eligible to submit a subcontract bid.
  • Responsibility Criteria:  If the prequalification process is not used, the GC/CM is required to include "specific objective criteria" that the GC/CM and public agency will use to evaluate whether the low subcontract bidder is a responsible bidder.  The primary difference between the prequalification and responsibility criteria processes is one of timing.  In prequalification, a determination of responsibility is made prior to bidding, while under the responsibility criteria section of state law (RCW 39.10.380 (2)), the determination is made after submittal of bids and prior to award of a subcontract by the GC/CM.  The responsibility criteria in GC/CM subcontract bidding is very similar to the Supplemental Bidder Responsibility Criteria permitted on Design-Bid-Build projects (RCW 39.04.350).
  • Early Selection of Mechanical and/or Electrical Subcontractors:  Under a 2010 law approved by the Legislature, a GC/CM may select the mechanical and/or electrical subcontractors early in the process, during the preconstruction phase before the construction documents have been finalized.  The purpose of this early selection process is to bring the experiences and expertise of these key subcontractors to the preconstruction phase.  Under this process, these subcontractors are selected through a very similar process by which the GC/CM is selected by the owner based on qualifications and bids for fee and general conditions work.  The actual construction cost is negotiated between the GC/CM and subcontractor and that price is then folded into the negotiated Maximum Allowable Construction Cost (MACC) between the GC/CM and owner.  This process has been used just a couple of time so far and is outlined in detail in RCW 39.10.385.
  • Payment and Performance Bonds:  For subcontract bid packages over $300,000, the subcontractors are required to submit a payment and performance bond to the GC/CM.  The owner bears the cost for these bonds as part of the MACC.  In this difficult construction economy, bonding companies are more carefully evaluating the financial viability of subcontractors.  Thus, bonding becomes an important tool to help ensure that only financially healthy subcontractors participate on these public GC/CM projects.  A GC/CM may also require a payment and performance bond for subcontract bid packages less than $300,000.
Applying the Tools:  Each GC/CM project is different: 
  • Prequalification may not be appropriate for some subcontract bid packages, and the time it takes to go through the process may limit its use.  
  • Bidder responsibility must be used for all subcontract bid packages where prequalification is not used
  • The early selection of the mechanical and/or electrical subcontractors is a time-consuming process that a project schedule may not allow for.  Some owners and GC/CM see value in this process while for others and for specific projects, it may not be as appropriate.
  • Bonding is required on all subcontract bid packages over $300,000.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Job Opening: Assistant Purchasing Manager

KCDA (King County Directors Association)
  • Position: Assistant Purchasing Manager
  • Location: Kent, Washington 
  • Job Summary: Manages all aspects of the procurement process from inception to closing for assigned product groups.  Coordinates activities involved with procuring goods and services for KCDA's customers.  Writes bids, evaluates and orders supplies and direct ship orders for KCDA members.  Fills in for Purchasing Manager when needed.  Communicates and coordinates with all KCDA departments, vendors, and customers as a member of a team.
  • Salary: $4,833 per month
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Monday, May 9, 2011

Rutgers University Resists Following Public Bidding Laws

Rutgers University, a New Jersey public university, currently enjoys an exemption from following public bidding requirements applicable to other public New Jersey colleges and universities.  If two state senators have their way, that would all change and would bring Rutgers into the fold along with other public agencies.

Broad Bidding Exemption:  The issue of Rutgers' exemption, which dates back to the 1950s, "allows for exceptions that are so general and undefined, they essentially give Rutgers officials unfettered discretion when selecting vendors," noted NJ State Comptroller Matthew Boxer.

Critical Audit Report:  The State Comptroller recently concluded a 22 month audit of Rutgers' procurement and contracting practices and found that Rutgers does not publicly advertise most of their contracts and solicits contractors from a select list of firms.  State Comptroller Boxer noted that 
"When public tax dollars are being spent, there is an obligation to avoid unfair favoritism toward particular vendors and make every effort to seek the best price available." 
List of Audit Recommendations:  While the University disagreed with many of the findings, they agreed with all of the recommendations, except the first two listed below.
  1. The Legislature and Governor, as well as the University itself, should consider imposing on Rutgers a requirement to follow State public bidding requirements.
  2. Revise the Policy to enhance competition for contracts exceeding $40,000 by requiring advertising without limit to pre-approved vendors.
  3. Revise the Policy to define the criteria that permit non-competitive negotiated contracts as a procurement method.
  4. Require documentation explaining the reasons for each non-competitive negotiation or other waiver from a competitive vendor-selection process.
  5. Ensure that the Board of Governors approves any non-competitive contract exceeding $1 million.
  6. Enforce the Policy addressing waivers from competition for sole source and single source contracts.
  7. Require each vendor to submit an ownership disclosure form to facilitate enforcement of the Policy concerning the award of contracts to employees and related parties.
  8. Utilize the DPMC system for prequalification of contractors, architects, engineers and other construction professionals.
  9. Monitor adherence to revised Board policies concerning approval of employee contracts.
  10. Monitor adherence to the University's policies and procedures that limit the use of Quick Orders.
  11. Attempt to negotiate discount pricing agreements with vendors being paid substantial amounts by the University as a result of bulk or repetitive purchases.
  12. Require the Internal Audit Department to periodically review Quick Orders to determine whether they are being used in accordance with University Policy.
  13. Develop a comprehensive plan concerning implementation of the remaining RLAS applications, considering the cost-effectiveness of various options and the business justification for remaining implementations.
  14. Implement the recommendations concerning information technology security measures that were provided to Rutgers' officials.
  15. Using the software already purchased, automate the bank reconciliation process to increase the efficiency of operations.
  16. Develop a clear policy that lists necessary procedures regarding cash deposits, reconciliations and the transfer of information to the University's bank accounts.
  17. Periodically update policies and procedures to reflect the current operating environment including RLAS and any subsequent modifications to RLAS.
  18. Maintain a comprehensive, up-to-date list of all business offices, their functions, location and staff assigned. 
Resistance to Audit Recommendations:  In arguing against the first two recommendations that would require Rutgers to use the same public bidding requirements as other state colleges and universities, which includes public bidding for all contracts over $40,000, Rutgers suggested they have sufficient practices in place to ensure competitive procurements, even though it is not required by state law.

Additional Information:
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Sunday, May 8, 2011

Getting HIred by a Public Agency in the Seattle Area

If you're looking for a job with a government agency in the Seattle-Tacoma area, you might be interested in the article posted by Heather Krasna on www.GovLoop.com.  

In the article, she analyzes different hiring processes used by the City of Seattle, King County, Sound Transit, and the City of Tacoma.

Heather is the author of "Jobs That Matter: Find a Stable, Fulfilling Career in Public Service" and Director of Career Services at the Evans School of Public Affairs at the University of Washington.

Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Job Opening: Purchasing and Contracts Manager

Evergreen State College (Washington)
  • Position: Purchasing and Contracts Manager
  • Location: Olympia, Washington 
  • Job Summary:  The Purchasing and Contracts Manager is responsible to manage the procurement of all supplies, equipment and services for the College, which includes managing the solicitation, negotiations, and awarding of purchase orders, agreements and contracts.  Manage the preparation, review, negotiation, administration and termination of contracts, agreements, leases and letters of understanding in which the College may enter.  Supervises purchasing staff.
  • Salary: $5,179 to $5,956 per month 
  • Closing Date: Open until filled.  Review of applications begins May 18, 2011
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Job Openings: 2 Contract Specialist Positions

State Department of General Administration (Washington State)

Positions:  Contracts Specialist 2 and Contracts Specialist 3

Location: Olympia, Washington 

Job Summary: 
  • Contracts Specialist 2: Performs journey level statewide contract management of a group of assigned goods and services.  Exercises signing authority of $100,000.
  • Contracts Specialist 3:  Performs senior level statewide contract management of a group of assigned goods and services.  Exercises signing authority of $500,000.
  • Contracts Specialist 2 - $3,549 to $4,653 per month
  • Contracts Specialist 3 - $4,114 to $5,395 per month
Closing Date: Friday, May 13, 2011

For More Information and To Apply: Click here
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Thursday, May 5, 2011

My Training Schedule This Week

Wednesday, May 4:  On Wednesday, I taught 45 professionals from various public agencies on public works contracting issues in Spokane, Washington.  The topics I addressed included the following:
  • Bidding and Contract Documents
  • Receipt and Opening of Bids
  • Bid Responsiveness and Bidder Responsibility
  • Insurance, Bonds, and Retainage
  • Change Orders
  • Public Works Contract Close-out
The class was co-sponsored by WSDOT and the Municipal Research and Services Center.  I will be teaching the same class on May 26, 2011 in Shoreline, Washington, on September 21, 2011 in Ellensburg, Washington, and again on November 16, 2011 in Olympia, Washington.

For more information about the class and to register, visit WSDOT's website by clicking here.  Click on the link for "Purchasing, Bidding, and Contract Management for Local Agencies."

Thursday, May 5:  On Thursday, I gave two training speeches at the annual conference of the Washington Association of School Business Officials (WASBO), in Spokane, Washington.   My two topics were:
  • We're Being Audited! - Tips for Managing and Surviving Audits
  • What is the Davis-Bacon Act? - Complying with Federal Prevailing Wage Requirements
Each of these sessions was 50 minutes long.  There were about 40 people in the Audit class and 30 in the Prevailing Wage class.  The attendees asked great questions.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Wednesday, May 4, 2011

Major Garbage Incinerator Project Causes Stir in Palm Beach County

A contentious new $600 million garbage incinerator contract was recently awarded to the low bidder by the Palm Beach County Solid Waste Authority. The project has been the subject of controversy between the three companies that submitted bids as well as with local unions. The objections revolve around a number of issues:

Cost vs. Technical Considerations: The proposals were first rated on technical grounds, with all three scoring relatively close to each other. However, when bids were opened, the lowest-ranking proposal on technical grounds - from Babcock & Wilcox (B&W) - turned out to be the low bid.

Bid Problems: The second lowest bidder, Wheelabrator Technologies, submitted an unsuccessful protest urging the disqualification of B&W for an inadequate performance bond and for changing their team after their Statement of Qualifications was evaluated.

Local Labor: Perhaps the most divisive issue has been use of local workers for the project. Local unions have voiced heated opposition to the winning proposal from B&W, which reserved just 20% of skilled jobs for local workers compared to 40% in the proposal by high bidder Covanta Energy (Wheelabrator also promised around 20%). Unions expressed frustration over past disagreements with B&W subcontractor BE&K and the low number of slots promised for local workers, while B&W stressed that the 20% figure was a guaranteed minimum that they would try to exceed. According to BE&K vice president Lance Hendrix, quoted by WPTV, "We always want to hire as many local workers as possible."

In the end (after a marathon nine-hour public meeting), the Palm Beach County Commissioners awarded the county's largest-ever public works contract to B&W by a 4-3 vote.

More information:

Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Training: Supply Chain Management

When: Friday, May 27, 2011 (8:30 a.m. to 4:30 p.m.)

Where: Lacey, Washington (Department of Ecology, 300 Desmond Drive SE)

Instructor: Steven M. Demel, CPPO, Tacoma School District Purchasing Manager

Description: This course provides purchasing and supply professionals with the essential supply chain management knowledge and tools necessary for optimizing customer support.

Expected Outcomes for Attendees:
  • Learn Supply Chain Management basics
  • Identify your role in the supply chain
  • Learn how to create your own business cases for supporting key supply and purchasing decisions, including justification for or against having a supply warehouse
  • Understand the roles of Purchasing in a successful supply fulfillment program
  • Recognize the benefits of Supply Chain Management best practices
Sponsored by: Washington State chapter of the National Institute of Governmental Purchasing

  • $150 - NIGP National or Chapter Member
  • $180 - non-member
Information and Registration: Click here
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Tuesday, May 3, 2011

Public Works Selection Processes and Requirements

The State of Washington has a number of different selection (or project delivery) processes that may be used for public works projects.  Despite the different processes, certain requirements apply to all public works projects.

Public Works Selection Processes:  In Washington State, the following are the basic options for selecting a contractor for a public works project:
  • Advertise the Project:  Publicly advertise the project and award to the responsible bidder submitting the low responsive bid.
  • Small Works Roster:  Solicit bids or quotations from contractors on the agency's Small Works Roster and award to the responsible bidder submitting the low responsive bid, consistent with RCW 39.04.155.
  • Limited Public Works:  Use the Limited Public Works process for projects less than $35,000 (part of the Small Works Roster), and award to the responsible bidder submitting the low responsive bid.
  • Direct Selection if Less than the Bid Limit:  Select a contractor without competition (or consistent with the agency's policies) if the dollar amount of the project is less than the threshold for competition for that type of public agency (often referred to informally as the "bid limit").  Different types of public agencies (cities, counties, port districts, school districts, fire protection districts, etc.) often have separate state laws that apply to their procurement of public works, services, and goods and supplies. 
  • Job Order Contracting:  This alternative public works process provides for the selection of a job order contractor to perform certain public works for less than $300,000 based on a unit price book.  The contractor is selected based on qualifications and their markup (coefficient) of the unit prices.  Under this process, outlined in RCW 39.10, 90% of the work must be subcontracted.  Not all public agencies are authorized to use this process.
  • General Contractor/Construction Manager (GC/CM):  This alternative public works process is also outlined in RCW 39.10 and provides for early selection of the contractor based on a combination of qualifications and limited pricing.  Generally used for projects of $10 million or more and requires approval of the State's Project Review Committee for a public agency to use this process.
  • Design-Build:  Another alternative public works process outlined in RCW 39.10 in which the public agency contracts with one firm to provide both the design and construction of the project.  Limited to projects of $10 million or more and requires approval by the State's Project Review Committee for a public agency to use this process. 
Required for All Public Works Projects:  
  • Mandatory Bidder Responsibility Criteria:  Regardless of the selection or project delivery process used, all public agencies in Washington must ensure, prior to award, that the successful contractor meets the mandatory bidder responsibility criteria outlined in RCW 39.04.350.
  • Resident Bid Preference Requirements:  Under the recently adopted legislation (2SSB 5662), once the State Department of General Administration (GA) surveys the practices of other states and adopts regulations implementing the legislation, public agencies in Washington will be required to provide a bid preference to resident contractors over out-of-state contractors.  Because it appears the legislation was written primarily with traditional public works projects in mind, GA will need to address in their regulations how the bid preference will be applied, if at all, to the three alternative public works contracting procedures outlined above. The legislation, which has not yet been signed by the Governor, states the following:
  • "In any bidding process for public works in which a bid is received from a nonresident contractor from a state that provides a percentage bidding preference, a comparable percentage disadvantage must be applied to the bid of that nonresident contractor."
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

Monday, May 2, 2011

Job Opening: Procurement & Supply Specialist

Evergreen State College (Washington)
  • Position: Procurement & Supply Specialist 2
  • Location: Olympia, Washington 
    • Job Summary: Under the direction and minimal supervision of the Purchasing & Contracts Manager, use independent judgment to plan, coordinate, and perform procurement of services, supplies, materials, parts and equipment for the college in accordance with state laws and College purchasing regulations. In conformance with College and State purchasing regulations, prepare, evaluate and award complex quotes, bids and requests for proposal for goods and services requested by campus community.  Answer questions from entry level purchasing staff and mentor where needed. Screen all contracts submitted for execution to assure proper content and compliance to state regulations. 
    • Salary: $2,994 to $3,918 per month 
    • Closing Date: Thursday, May 12, 2011
    Mike Purdy's Public Contracting Blog 
    © 2011 by Michael E. Purdy Associates, LLC 

    Cost Estimating and Contract Pricing - Training

    When: Wednesday, May 18, 2011 (8:00 a.m. to 5:00 p.m.)

    Where: Tumwater, Washington (Edna Lucille Goodrich Building, 7345 Linderson Avenue, S.W.)

    Instructor: Pamela Solis, CPCM, CCCM, CFCM, Contract Manager at Northrop Grumman Corporation in San Jose, CA

    Description: What should a product, service, or integrated business solution cost? How much is it worth to the buyer? What is the appropriate rate of return or profitability for a product or service? What constitutes a fair and reasonable price? How can buyers ensure they are not paying too much? How can sellers maximize sales, revenue, and profitability in a consistent manner? The answers to these questions range from simple to complex and are the focus of this seminar.

    Sponsored by: National Contract Management Association

    • Members: $265
    • Non-members: $315
    Pre-registration deadline: Tuesday, May 10, 2011

    Information and registration form (Word Document)
    Mike Purdy's Public Contracting Blog 
    © 2011 by Michael E. Purdy Associates, LLC 

    Sunday, May 1, 2011

    Miami Considers Boosting Local Preference Law

    The City of Miami may give even greater priority to local companies bidding on city projects if legislation currently on the drawing board ends up becoming law.

    Existing Local Preference: Miami procurement law gives a "second chance" advantage to local bidders: if the low bid is from an out of city bidder, businesses with a "local office" are given the opportunity to match the low bid price, provided their original bid did not exceed it by more than 10%.

    Proposed Change: Some city commissioners have suggested increasing the window of opportunity for local companies to match a low bid to 15%.

    Concerns Voiced: While the system sounds like an all-around win for the city (local vendors get a leg up and the city still pays the lowest price), some are concerned that over time the policy may discourage competition, causing prices to creep up. "If I were a bidder outside the jurisdiction, I would be discouraged from bidding," said former Miami-Dade County manager Merrett Stierheim about the proposed increase, which he called "excessive" (as quoted in Miami Today).

    More Resources:
    Mike Purdy's Public Contracting Blog 
    © 2011 by Michael E. Purdy Associates, LLC