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

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

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

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

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

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

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

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.

  • $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

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)

  • 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

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

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

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