Tuesday, February 3, 2015

Figuring Out What Went Wrong With the Bid Process

Sometimes, the expectations of public agencies for a bid aren't met.  Perhaps only one or two bidders submitted a price, or maybe the bid prices were significantly higher than the funds available.  What are the options available to an agency to move a public construction project forward? 

Contact contractors:  One of the most important steps a public agency can take after bid opening is to talk with the bidders and determine why their prices were so high, and to talk with other contractors to find out why they chose not to bid the project. 

Questions to ask:  The following are some of the questions an agency might ask bidders and potential contractors about their bid prices and/or why they chose not to bid on the project:
  • Ambiguity:  Were parts of the drawings and specifications unclear?  
  • Schedule:  Was the project schedule unrealistic? 
  • Risks:  Did contractors perceive the risk allocation for the project to be slanted too much toward the owner and disadvantageous to the contractor?
  • Complexity:  Was the work to be performed high risk with new and untested tools for successfully accomplishing the work?
  • Phasing:  Was the project structured in such a way that it includes complex phasing, scheduling, and staging of the work?
  • Other projects:  Were there other projects being advertised at the same time, limiting the capacity of the contractors to bid on all of the projects?
  • Federal requirements:  Were there federal requirements that discouraged competition or that inflated prices?
  • Project duration:  Did the project duration require bidders to hold prices for a longer period of time that bidders were comfortable with?
  • Insurance:  Were the insurance requirements too costly and/or difficult for contractors to obtain?
  • Liquidated damages:  Did contractors view the liquidated damage amount per day as being too risky?
  • Time of year:  Was the project bid at the wrong time of the year, resulting in higher prices?
  • Labor and material prices:  Was price uncertainty and potential escalation a factor in the higher bid amounts?
Re-advertise the project: Based on discussions with the bidders and other contractors, an agency may take a number of steps:
  • Change the requirements:  Modify the scope of work and other requirements based on concerns raised by the contracting community.
  • Additives and Alternates:  Restructure the bid form to include Additives and/or Alternates as a bid protection tool so that all bids don't have to be rejected if there are adequate funds for awarding the base bid but not the Additive or Alternate work.
  • Solicit contractors:  Reach out to qualified contractors and encourage them to submit a bid.
Find more money:  Sometimes, even with changes to the plans and specifications based on information obtained from contractors, more funding is still necessary to make the project financially viable.
Minnesota's troubled project:  The City of West St. Paul, Minnesota recently rejected all bids on a street reconstruction project estimated to cost $20.7 million when just two bids were received and the low bid was $7.7 million over the engineer's estimate.  Click here to read a well-written and revealing article from TwinCities.com on the project and what the city learned about the bid process.

Presidential History:
  • Presidential History Blog:   While I will discontinue writing this Public Contracting Blog on March 5, 2015, you can sign up for a free email subscription to my Presidential History Blog at www.PresidentialHistory.comOn a case-by-case basis, I will only be accepting limited consulting and training opportunities after March 5, 2015.
Mike Purdy's Public Contracting Blog
© 2015 by Michael E. Purdy Associates, LLC


Anonymous said...

I will miss this Blog! It has been an amazing resource at my agency, an Illinois local government agency.

Mike Purdy said...

I'm so glad that my blog has been a great resource for your agency. My intent all along has been to provide a service so that the public procurement profession can have a common understanding of critical issues. The blog will remain online and can be searched by key words or by the subject index to conduct research. My decision to discontinue writing the blog was not an easy one for me to make, but I think it's the right time for me to transition into a new season of life that will enable me to write about the U.S. Presidents - something that has been a passion of mine for years.