What Requirements Still Apply for Emergency Public Works Contracts?

When a public agency has declared an emergency and waived competitive bidding requirements for a public works construction project, what is being waived is the contractor bidding and selection process.  In other words, under an emergency contract seeking bids is not required.  

Not enough time to conduct a bid process:  The nature of emergencies dictates that there is not sufficient time to conduct a bid process without raising the risk that individuals may be injured, property damaged, or that the essential functions of government may not be fulfilled.  The definition of an emergency public work varies by state. In Washington state, it is defined in RCW 39.04.280. 

What is required for emergencies:  The following is a list of some of the requirements that still apply for emergency public works projects.  Generally, only the selection process is waived through the emergency declaration.  While this list is based on Washington state law, portions of it may also apply for other states, depending on their specific requirements:

• Declaration of emergency:  A formal declaration of an emergency must be made.  See RCW 39.04.280.

• Bidder Responsibility:   The mandatory bidder responsibility criteria of RCW 39.04.350 still apply for emergency contracts.

• Contract:  There should still be a public works contract documenting the various requirements and the dollar amount of the project, even if it is for a time and materials, not-to-exceed amount.

• Prevailing wages:  Prevailing wages must still be paid consistent with the requirements of RCW 39.12.

• Intent:  A Statement of Intent to Pay Prevailing Wages must be approved by the Department of Labor and Industries and filed with the public agency prior to making any payments to the contractor.  A separate Intent must be completed for the contractor and each subcontractor, regardless of tier.

• Affidavit:  An Affidavit of Wages Paid must be approved by the Department of Labor and Industries and filed with the public agency prior to making payment of retainage to the contractor.  A separate Affidavit must be completed for the contractor and each subcontractor, regardless of tier.

• Bonds:  A payment and performance bond must be submitted to the agency for the work, in accordance with RCW 39.08.

• Insurance:  The amounts and types of insurance required on a public works project are governed by each agency and not by Washington state law. 

• Retainage:  Retainage should be withheld from each progress payment.  See RCW 60.28.  The only exceptions to not withholding retainage is if a retainage bond is submitted by the contractor or if the contractor was selected through the Limited Public Works process under the Small Works Roster (for public works projects less than $35,000), in which case there would have been no need to waive the competitive bidding process.

Timing of emergencies:  While the above items are still required under Washington state law for an emergency public work, agencies must ensure that health, safety, and property are protected and that an agency's essential functions continue to serve the public.  Sometimes, due to the emergency nature of the project, it is important to get a contractor on the job site immediately, perhaps in the middle of the night, to address the emergency.  In such a case, often some of the paperwork requirements are addressed after the fact. 

Emergency procedures:  Washington state law does not have exemptions for public works requirements on emergency projects, other than for the actual bidding and selection process.  It is important that each public agency have clear emergency public works procedures that will dictate:

• Compliance:  The timing of compliance with the requirements of state law.

• Authorization:  Who within the agency is authorized to declare an emergency and waive competitive bidding.  This person or persons should be available at any time, which is why it is often problematic to dictate that only an elected board or council may waive competitive bidding.
  

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

When Do Emergencies Cease to be Emergencies?

In public procurement, most states and local agencies have provisions that permit them to award a contract for goods, services, or construction in the event of an emergency.

Definition of an emergency: The definition of what constitutes an emergency and the subsequent waiving of competitive bidding requirements varies for different agencies, depending on state and local laws and policies.  Generally, however, an emergency occurs when there are unforeseen circumstances beyond the control of the agency that will likely result in any of the following if immediate action is not taken:

• Material loss or damage to property
• Bodily injury or loss of life
• A real or immediate threat to the proper performance of essential functions.

How long do emergencies last?  Waiving competitive bidding requirements due to an emergency is an exception to the normal requirements.  Thus, emergency contracts are usually only valid to address the immediate emergency situation.  If there is subsequent or follow-up work that is necessary, it would generally not be deemed an emergency if the public agency would have sufficient time in which to competitively bid the work.  This, however, is a case-by-case decision that requires exercising subjective and wise judgment.

Washington state:  In Washington state, emergencies are defined in RCW 39.04.280, although some specific types of agencies also have their own definitions for emergencies.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

Planning for Emergency Construction Contracts

Laura Antonuccio

"Public contracts for construction or construction-related services are typically awarded through a traditional competitive process to the bidder who offers the best value or lowest price," writes Arizona attorney Laura Antonuccio.  "Although this process is complex and often time-consuming, it serves the public interest by helping ensure that taxpayer dollars are spent wisely, fairly and transparently.  However, because it does not always make sense to follow traditional procurement procedures," many public agencies have procedures that enable them to waive competitive bidding requirements in the event of an emergency.

What is an emergency?  The definition of an emergency that justifies waiving competitive bidding requirements varies by different agencies.  However, here are some elements that are often part of the definition of an emergency:

• Unexpected:  An unexpected event or unforeseen circumstance

• No control:  It is beyond the control of the public agency

• Performance threatened:  It presents a real and immediate threat to the proper performance of essential governmental functions

• Property loss and bodily injury:  It has resulted in, or will likely result in, material loss or damage to property, bodily injury, or loss of life

• Immediate action:  It requires immediate action and there is not sufficient time to go through a competitive bidding process

2-Step process:  In the event of an emergency, there are really two actions that a public agency takes to bypass normal competitive bidding requirements.  

1. Declare that an emergency situation exists
2. Waive competitive bidding requirements

Who can declare an emergency?  Public agencies have different organizational structures and so who is authorized to declare an emergency and waive competitive bidding may vary.  Here are some questions for public agencies to answer about emergency contracts:

• What's required?  Do your laws and policies specify who may declare an emergency?

• Delegation?  Do your policies delegate authority to declare an emergency to appropriate individuals?  

• Timely response?  If an elected council or commission must declare an emergency, will they be available to act in a timely manner when an emergency occurs?  Have they delegated their authority to an administrative person? 

• Availability outside normal hours?  How will your agency respond if an emergency occurs in the middle of the night (a broken sewer or water main, for example)? 

Notifying the public:  Many emergency contracting laws and policies require that an individual or body formally notify the public within a certain number of days after the emergency has been declared that the agency took emergency action and waived competitive bidding requirements.  This may take the form of an advertisement in a newspaper or a posting on the agency's website.  In the interest of transparency, this is an important part of the process.

Time is of the essence:  In making the necessary repairs in an emergency situation, time is of the essence.  Here are a couple of strategies for planning ahead to make sure appropriate resources will be available to address the emergency:

• On-Call emergency response contracts:  Some public agencies publicly and competitively advertise for on-call emergency contracts that are only used in emergency situations.  This eliminates the need to actually declare an emergency and waive competitive bidding, because the bidding has already occurred ahead of time.  It is important to assess the types of emergencies that are most likely to occur in developing these on-call emergency contracts.  Click here to read about some of the issues associated with on-call public works contracts in the State of Washington.

• Maintain list of available contractors:  In the absence of an on-call emergency contract, public agencies should maintain a list of contractors who could be available to respond quickly in the event of specific types of emergencies.  In developing this list, it is important to talk with the contractors to assess what their availability might be, and how they can be contacted in the event of an emergency that may occur outside of normal business hours.

• Work by agency personnel:  Some public agencies have maintenance and repair staff who may be available to respond to emergency situations.  Make sure they are authorized by laws to perform public works construction projects, and if there are any dollar limitations of the amount of work they may perform.  Having contact information for these employees outside of normal working hours is an important part of planning for responding to emergencies.

Resources:

• Definition of emergency in Washington state:  RCW 39.04.280 provides a definition of an emergency public works project.

• Article:  Emergency Construction Contracting, by Laura Antonuccio, an attorney with Gallagher & Kennedy, P.A., in Phoenix, offers a good explanation of emergency contracting requirements in Arizona and how contractors should reach out to public agencies to make them aware of their capabilities in the event of emergency situations.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

Developing Estimates on Public Works Projects

Developing an cost estimate on a public works construction project is not only a good practice, but in some cases, it is required by laws or regulations.

When is an estimate required?  The following regulations address cost estimates on public works projects. 

• Washington State:  RCW 39.04.020 dictates that there must be an estimate of the cost of a public works project prior to soliciting bids (whether advertised or through a Small Works Roster process).  Note that there is no minimum dollar thresholds specified for when the cost estimate must be performed.  Here's the specific language of the state law:

Whenever the state or any municipality shall determine that any public work is necessary to be done, it shall cause plans, specifications, or both thereof and an estimate of the cost of such work to be made and filed in the office of the director, supervisor, commissioner, trustee, board, or agency having by law the authority to require such work to be done. The plans, specifications, and estimates of cost shall be approved by the director, supervisor, commissioner, trustee, board, or agency and the original draft or a certified copy filed in such office before further action is taken.

• Federal regulations:  In addition, many federal grant regulations contain language requiring "independent estimates before receiving bids or proposals."  Check the language of your federal grant regarding requirements on developing an estimate.

Who should perform the estimate?   The cost estimate may be performed by either internal agency staff, by the architect/engineer, or by another independent party hired by the public agency.  Some agencies make it a practice, especially on small projects, to obtain the estimate from contractors.  There are a couple of issues associated with this practice. First, depending on the circumstances, it may give one contractor a competitive advantage over others since they would have advance information about the project.  Second, an estimate from a contractor does not really represent an independent estimate.  The practice of obtaining the estimate from contractors should be used with caution, especially if federal funds are involved.

What should the estimate be based on?  An estimate should break down the project into its component parts of labor, materials, equipment, overhead, and profit, evaluating likely costs in each of these areas.  The size of the public works project will help dictate the level of detail and specificity that should be the basis of the estimate.  For example, a large public works project should be accompanied by a fairly detailed cost estimate based on estimates of current prices in the market.  On the other hand, a small public works project estimate might be based on historical prices the agency has paid for similar services.

Document the estimate:  It is important that the estimate be developed, reviewed, approved, and maintained as part of the project file.  Clearly documenting the estimate is an important step of demonstrating in an audit that the estimate was performed.

How is the estimate used?  The cost estimate is a matter of public record and is subject to public disclosure upon request.  Some agencies publish either the estimate or a range of the estimate in the Invitation to Bid or bidding documents.  Click here to see the results of a survey of agency practices on disclosing estimates that I conducted in the fall of 2011.  In Washington state, the estimate is important in determining at least two things:

• Subcontractors List:  Whether the Subcontractors List required by RCW 39.30.060 should be submitted with the bid.  The Subcontractors List applies to public works projects estimated to cost $1 million or more. 

• Small Works Roster:  Whether bids may be solicited through the Small Works Roster, which may be used only for projects estimated to cost $300,000 or less.

Work performed by public employees:  RCW 39.04.020 states that whenever an agency determines that a public work be "executed by any means or method other than by contract or by a small works roster process" (which I think means work by public agency employees), and the estimate is over $25,000, the agency must publish a notice of the work to be done (along with the estimate) in a legal newspaper at least fifteen days before the work begins.  Some types of agencies have restrictions in state law regarding how much work they can perform with their own forces.  Here's the language from RCW 39.04.020:

If the state or such municipality shall determine that it is necessary or advisable that such work shall be executed by any means or method other than by contract or by a small works roster process, and it shall appear by such estimate that the probable cost of executing such work will exceed the sum of twenty-five thousand dollars, then the state or such municipality shall at least fifteen days before beginning work cause such estimate, together with a description of the work, to be published at least once in a legal newspaper of general circulation published in or as near as possible to that part of the county in which such work is to be done.

Emergencies:  RCW 39.04.020 further notes that for an emergency public works project, the public agency is required to publish a description and estimate "within seven days after the commencement of the work."  This would be published in  your official newspaper or newspaper of general circulation in your area.  Some may consider that publication on your agency's website would also meet the requirement for publication.  Here's the language from RCW 39.04.020:

When any emergency shall require the immediate execution of such public work, upon a finding of the existence of such emergency by the authority having power to direct such public work to be done and duly entered of record, publication of description and estimate may be made within seven days after the commencement of the work.

Review your practices:  Review your agency's practices and policies regarding use of estimates, and discuss any concerns or outstanding issues with your attorney.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Project Delivery Methods for Public Construction Projects

Let's take a look at some of the project delivery methods that are sometimes used for public works construction projects. 

Design-Bid-Build:  Traditionally, most public works construction projects are advertised and then awarded to the lowest responsible bidder with a responsive bid.  This is known as the Design-Bid-Build model, where there is a separate designer, the agency then bids the project, and it is awarded to a contractor to build it.  

Rosters:  Sometimes, there are variations to the bidding process.  The project may be publicly advertised or the plans and specifications may be provided to only a limited number of bidders on a roster.  But it's still Design-Bid-Build since bidders are submitting prices for constructing the project based on complete plans and specifications.

Design-Build:  In the Design-Build model, the public agency selects one firm to both design the project and to build it.  Here are some features of Design-Build: 

• Ends the blame game:  Eliminates a traditional source of contention with contractors blaming the designer for faulty design when things go wrong, and the designer blaming the contractor for faulty installation.

• Speed:  Can be a fast process for delivering projects.  

• Requires sophisticated owner:  It is a more complex process and requires a fairly sophisticated public agency to manage not only the selection process, but the actual design and construction portions of the work.   

• Not applicable for all projects:  May not be a good project delivery method if the agency and the end users or the public want to have significant input into the design.

• Selection process:  In some instances, the Design-Builder might be selected based on a combination of qualifications, design, and price, while in others they may be selected only based on qualifications, and then work with the agency during the design process.  At the end of design, the parties would negotiate a contract price.

• Industry resources:  The Design Build Institute of America (DBIA) is an industry association that promotes this method and develops best practices.

Construction Manager at Risk: The Construction Manager at Risk method goes by a variety of different names, including GC/CM (General Contractor/Construction Manager), CM/CM (Construction Manager/General Contractor), CM at Risk, and CMAR.  

• Preconstruction Services:  It is a method in which the agency selects a contractor early in the design process to provide consultant input to the design from a contractor’s viewpoint, and to begin planning the project.

• Qualifications and Price Based Selection:  The selection is based on qualifications and limited pricing, such as the cost of general conditions work and the contractor’s overhead and profit.

• Negotiated Price:  When the design documents reach a certain percentage of completion, the agency and contractor negotiate the construction cost.

•  Subcontractors:  In some jurisdictions, there are requirements that all work be competitively bid or that limits the amount of work the contractor may perform with their own forces, while other agencies don’t have such requirements.

IDIQ (Indefinite Delivery/Indefinite Quantity):  Job Order Contracting is one form of IDIQ and is a means for agencies to obtain the services of a contractor on an on-call or as-needed basis for construction, maintenance, and repair work without advertising each specific project.  Typically, the contractor is selected partially on qualifications and partially based on either unit prices or price markups.  Other forms of IDIQ include advertising for bids from contractors  to perform on-call work in a specific specialty area (such as electrical or carpentry).  Selection is usually based on unit prices.

Public-Private Partnerships: In an era with shrinking public dollars for public improvements, some agencies have successfully tapped into the private sector with creative, “one-off” types of partnerships, in which the private sector contributes financially to the project with the prospect of gaining financially.  Examples might include a toll highway built and operated by the private sector, or low income housing projects that benefits from federal tax credits.

Best Value Procurement:  In Best Value Procurement, a contractor is selected based on a combination of their bid of complete plans and specifications for a construction project, and also based on their qualifications.  Evaluation criteria with maximum points are established for both the bid price as well as specifics about the contractor’s qualifications.  As an example, if the bid amount was only worth 15 points out of a total of 100 points, an agency could end up awarding a project to a firm without the low price because they were rated high on their qualifications.  

No Competition:  Some public agencies have dollar thresholds, below which they are not required to obtain bids for a project, but are free to select any contractor.  

Emergency Project:  Other times, competitive bidding is waived in the event of an emergency situation when there is not sufficient time to advertise and award a project.  Emergencies are usually based on a threat to public safety or health, or a situation which would prevent the agency from performing its essential functions and providing critical services.

Work Performed by Agency Staff:  Some public agencies have dollar thresholds, below which their own internal staff may perform public works projects, and that don't have to be competitively bid to contractors.

Other Project Delivery Methods:  There are a variety of other project delivery methods, some of which are not used as frequently.  These include Multiple Prime Contracts and Integrated Project Delivery.

Regulations and Resources:  In assessing the most appropriate project delivery method to use:

• Regulations:  Review your state and local laws to see what methods your agency is authorized to use.

• Staff:  Assess your staff resources and knowledge and whether you have sufficient ability to engage in some of the more complex project delivery methods.

• Project:  Evaluate what project delivery method will be best for a specific project.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

The Risks of Decentralized Procurement

Many public agencies, especially smaller ones, do not have a centralized procurement and contracting function.  There are risks involved in such an organizational structure.

Educating Managers:  In a decentralized procurement model, it is up to each department and the directors and managers of those departments to understand what is permissible under applicable federal (if federal funding is involved), state, or local laws and regulations.

Complexities of Public Procurement:  Because public procurement is often complex, and operational departments have their own responsibilities and areas of expertise, without a centralized procurement function, often procurement activities occur that are in violation of applicable regulations.

Audit Finding:  The City of Arlington, Washington recently received an audit finding from the State Auditor's Office after the Fire Department contacted three vendors to provide quotes to provide a new ambulance for the city.  The city's 1994 vehicle had broken down and could not be repaired.  But the $128,142 purchase far exceeded the city's $7,500 threshold, above which formal advertised competitive bids should have been received.  Instead, the city only received one quote, informally solicited.  The Fire Department took the purchase to the City Council who approved the purchase, not realizing that the procurement needed to be either through advertised bids or approved by a specific emergency resolution.

Practical Tips:

1. Point Person:  Public agencies without a centralized procurement function should designate at least one person to become the resident expert on procurement and contracting.  
2. Approval Process:  There should be a deliberate internal approval process for purchases and contracts with checks and balances.
3. Policies and Procedures:  Agencies should develop clear procurement and contracting policies and procedures, making use of easy to follow checklist to help ensure compliance with regulations.   
4. Training:  Agencies should regularly provide training to personnel on procurement and contracting issues to raise the level of awareness.

Mike Purdy's Public Contracting Blog 

© 2011 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

When Are Circumstances "Unforeseen" Justifying an Emergency?

Waiving competitive bidding requirements due to an emergency public works project can be tricky.

According to Washington State law on exemptions to competitive bidding requirements, 

"'emergency' means unforeseen circumstances beyond the control of the municipality that either: (a) Present a real, immediate threat to the proper performance of essential functions; or (b) will likely result in material loss or damage to property, bodily injury, or loss of life if immediate action is not taken." (RCW 39.04.280 (3)).

Citing this definition, the Washington State Auditor's Office issued a finding against The Historic Seattle Preservation and Development Authority (Historic Seattle) for improperly declaring an emergency in order to waive competitive bidding for a remodeling contract on Washington Hall initially worth $480,000.  Including change orders, the cost grew to $670,000 before completion.

Audit Findings

• What Does "Unforeseen" Mean? Although the condition of the building was known before the purchase, Historic Seattle reasoned that before buying the building it "had no ability to repair the property and no liability for personal injuries resulting from the building’s unsafe condition". Using a definition of "unforeseeable" as meaning "not able to be predicted or planned for in advance" (emphasis added) Historic Seattle argued that it was "not able to plan to make repairs to the building in advance of acquiring ownership."
  
  The Auditor's report noted that a prior appraisal of the building - performed months before Historic Seattle bought it - had "documented 'significant deferred maintenance' and concluded the building had 'a remaining economic life of zero years'". Since the results of the appraisal "are advance notice that the building will require significant repair and remodeling" and the building's "neglect was obvious at the time of purchase," the Auditor concluded that neither "issues noted during the appraisal" nor "concerns for the health and welfare of the tenant" constitute unforeseen circumstances.
  
  
• Building Open During "Emergency" Construction: The Auditor's report also called into question the timeline of the repairs, observing that although "state law says a declaration of emergency is to be addressed promptly" the repairs continued for over a year. Moreover, the Auditor noted that since Historic Seattle "declared an emergency stating the building was unsafe for general occupation," opening the building six months before construction was finished "appears to contradict the need for the emergency declaration." Historic Seattle responded that in spite of delays "all [work] but the electrical service upgrade... was completed within four months of award of the bid".
  
  
• Work Not Limited to Emergency Work: The Auditor also found that the "contract was not limited to repairs related to unsafe conditions" and that Historic Seattle "allowed unlimited change orders."

Questions to Ask Before Declaring an Emergency

• Is it an Emergency? Does the situation fulfill both parts of the exceptions to competitive bidding requirements in RCW 39.04.280? On a basic level, you can ask these two questions:

1. Was the situation not anticipated and beyond the public agency's control? And...
   
2. Is the situation either threatening performance of essential agency functions or likely to cause property damage, injury, or death if it's not addressed?

• Is the Emergency Timely?  Did the public agency formally waive competitive bidding requirements in a timely manner?  Does the project address the emergency work in a timely manner?

• Is there Sufficient Time to Bid the Project?  Does the public agency have sufficient time to conduct a publicly advertised bid process?

• Does the Emergency Go Too Far? Does the contract cover only work that's needed to address the emergency situation, or does it also include additional work that would be more appropriately covered through competitive bidding? (This is a good question to ask about any change orders to the project as well)

Read the full audit findings here.

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

City Adds More than $500,000 to Contract by Change Order

The Washington State Auditor's Office has issued an audit finding asserting that the City of Bellingham, Washington should have competitively bid $536,151 of sewer pipe and drainage repairs, instead of issuing six change orders to an existing and unrelated contract.

Obtaining a Fair Price:  Change orders for work unrelated to an original contract violate the intent of the state's competitive bidding requirements, and do not, according to the auditor, "guarantee the most efficient use of public resources."  The City asserted that they negotiated a significant reduction in the contractor's markup percentage for the change order work.

Emergency Not Declared:  "In retrospect," the City noted, it "should have declared an emergency for public safety/health and environmental reasons."  The change order work was authorized when the City discovered that sewer pipes and drainage under City Hall were leaking, necessitating immediate action.  

A formal declaration of an emergency and waiving competitive bidding would have authorized the City to contract for the emergency repairs through either a new contract or any existing contract, even if not related to the emergency work.

City Changes Practices:  According to City Public Works Director, Ted Carlson, the City has made changes to its practices to ensure similar problems don't occur in the future.

Additional Information:

• Audit finding
• Article in The Bellingham Herald 

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

Connecticut Auditor Urges Elimination of Overly Broad Exemption for Competitive Selection

The State of Connecticut's Auditor of Public Accounts has urged the General Assembly to eliminate an overly broad exemption available to state agencies in the selection of firms for personal service agreements with a cost more than $20,000.

Connecticut law [Section 4-215 subsection (a)] lists a number of exemptions available to state agencies.  It also authorizes the state's Office of Policy and Management (OPM) to develop additional exemption criteria.  One of the additional exemption criteria established provides for a waiver of competition for "services that require a contractor that has special capabilities or experience."

The auditor noted in their 2009 annual report to the General Assembly that this additional exemption "is an often-used condition for granting waivers from competitive bidding" and that it has the impact of limiting competition.  

The auditor recommended that the General Assembly limit exemptions to only the following criteria specified in state law:

1. Services for which the cost to the state of a competitive selection procedure would outweigh the benefits of such procedure, as documented by the state agency.
2. Proprietary services.
3. Services to be provided by a contractor mandated by the general statutes or a public or special act.
4. Emergency services, including services needed for the protection of life or health.

Free Training on Emergency Contracting

The Municipal Research and Services Center (MRSC) and the Washington State Chapter of the American Public Works Association (APWA) have announced free training on emergency contracting at the following locations:

• Yakima (November 24, 2009)
• Renton (December 1, 2009)
• Camas (December 9, 2009)
• Everett (December 17, 2009)
  

For more information and to register online, visit the website of the Contract Administration Subcommittee of APWA.

Irregular Public Bidding and Contracting in Baltimore

A Baltimore, Maryland agency is under criticism for awarding six demolition contracts worth $2.3 million without following normal public bidding and contracting procedures.

The Baltimore Development Corporation (BDC), created in 1991, is a 501(c)(3) non-profit corporation under contract with the City of Baltimore and operates as a quasi-public agency. Their authority to even engage in public works contracting for the city is unclear.

Bids and contracts under criticism include the following:

• Awarding to the third low bidder on a project to demolish of 12 rowhouses. The BDC stated that the two low bidders did not understand the full scope of work, but has been unable to document such an assertion.
  
  
• Awarding a $1.5 million City Center demolition project to the third low bidder after claiming that the two low bidders were late in submitting their bids. The contract used was adapted from a private contract and inapplicable provisions were crossed out by hand and new provisions hand-written in.
  
  
• On two projects, there was no public advertisement and the BDC simply asked for bids from two firms. Projects over $25,000 must be advertised by city agencies.
  
  
• A $378,477 demolition contract was awarded without public bidding because the BDC believed the building was an immediate threat to public safety. However, no process was apparently followed to determine whether an emergency actually existed requiring the waiving of public advertisement for the project.
  

Complicating matters is the ambiguity about just what authority the BDC actually has to engage in such public works projects. Even Baltimore's legal experts concede that "There is not an easy way for the law department to look at BDC and simply say 'Here is what you can do. Here is what you can not do."

According to Baltimore's Deputy Mayor Andrew B. Frank, a former BDC employee, BDC rules are "passed on from generation to generation," and are frequently not documented in writing, prompting one critic to label the BDC as a "rogue" agency that "is acting beyond the wildest conceptions of their legitimate role."

The irregular bidding and contracting practices of the BDC were first brought to light by The Baltimore Sun newspaper.

Click here to read the October 5, 2009 article by Sun reporter Annie Linskey.

Emergency Declared for Potential Flooding Threat

The King County Council (Washington) on September 10, 2009 declared an emergency in order to permit the county to respond to potential flooding this fall.

The proactive and somewhat unusual step was taken in response to the weakened capacity of the Howard Hanson Dam on the Green River. The council action enables the county to waive procurement and contracting regulations in order to address the emergency. Usually, emergencies are only declared after an event has occurred.

For further information:

• Visit the King County Council's website in order to download the staff report and the actual emergency declaration
  
  
• A news release from the council describes the action further
  
  
• A Seattle Times news article

Training: Emergency Management for Purchasing Professionals

Emergency Management for Purchasing Professionals: The Four Rs and the Tale of Two Boxes

When: Tuesday, November 10, 2009 (8:30 a.m. to 4:30 p.m.)

Where: City of Renton - Maintenance Shop (3555 NE 2nd Street, Renton, Washington)

Sponsored by: Washington State Chapter of NIGP (National Institute of Government Purchasing)

Instructor: Bruce Brady, Senior Buyer, Mt. San Jacinto Community College District

Cost:

• $150 (national NIGP member)
• $150 (Washington State NIGP chapter member)
• $180 (non-NIGP member)

For more information and to register, visit the NIGP website for Washington State.

Emergency Contracting

Most public agencies have a process for waiving competitive bidding in the event of an emergency situation that doesn't allow sufficient time for going through the normal selection process. However, it is important to remember that while an emergency declaration saves time on selection, it doesn't change the need for sound project planning, implementing wise risk management strategies, negotiating diligently, nor does it waive the requirement for effective contracts.

King County Declares Emergency

King County Executive Ron Sims declared an emergency and waived competitive selection procedures to hire The Sazan Group to re-design deteriorating hot water pipes at the Maleng Regional Justice Center in Kent. Sazan studied the issue and issued a report stating that "the pipe appeared to be on the verge of immediate collapse or rupture."

Hiring a firm to conduct design work when they have conducted a study indicating the need for design work does not technically violate any law. It does raise interesting issues of potential conflict of interest, however. On the other hand, with the potential for a catastropic failure of the pipes, the emergency nature of such an action may be appropriate.

Click on the Seattle Times to read a more complete story about the emergency.

Three Risks of Emergency Public Works Contracting

There are three primary risks to declaring an emergency and waiving competitive bidding on a public works project:

1. Protest. To the extent that a public agency waives competitive bidding for a project that doesn't meet the test for an emergency, other contractors who were not selected to perform the work may protest that they were not provided with an opportunity to submit a bid.
   


2. Pricing. By waiving competitive bidding, a public agency must negotiate the cost of an emergency public works project with the contractor. Many public agencies do not have the experience or personnel necessary to effectively negotiate such pricing because most of their work is done through the bidding process where they accept the low bid. If the emergency work is authorized on a time and materials basis, it is important for the public agency to keep close records on the time and materials expended by the contractor to ensure that the appropriate amount is paid. Emergencies, by their very nature, often require payment of a premium amount in order to solve the problem within a very tight time schedule.
   


3. Political. If competitive bidding is waived for a project that does not meet the legal definition of an emergency, political and appointed officials may find themselves subject to criticism and quoted on the front page of the local newspaper. And, of course, there is the additional risk of an audit finding from the State Auditor's Office for an inappropriate declaration of an emergency.
   

There are emergencies...and then there are emergencies. The broken water or sewer pipe in the middle of the night is an emergency that requires immediate action, notwithstanding requirements for formally waiving competitive bidding requirements. Then there are other emergencies that do not have quite the same level of risk involved with not acting immediately. And, of course...there are emergencies that are created by poor planning. These are often difficult to jusify as real emergencies warranting the waiving of competitive bidding.

Free Training on FEMA Contracting Requirements

Disasters Happen - Are You FEMA Ready?

Four informative sessions at the Excellence in Procurement Summit

When: Thursday, March 26, 2009, 8:30 a.m. - 4:00 p.m.

Where: UW Tacoma, Keystone Building, Carwein Auditorium, 1953 C Street, Tacoma, WA

Sponsored by: Washington State Chapter of NIGP (National Institute of Governmental Purchasing)

Cost: Free

Speaker: Alysha Kaplan, Regional Public Assistance Supervisor, Washington State Emergency Management Division

For more information and to register, visit the website of NIGP's Washington State Chapter

Questions, contact Cathy Robinson at 206-801-2321

King County Waives Competitive Bidding Requirements

In response to the January flooding in King County, the King County Council voted on January 12, 2009 to waive competitive bidding requirements on repairs necessary to protect life and property. Click here to view the ordinance passed by the Council.

Public Works Emergencies

If you have an event that requires the declaration of an emergency and waiver of competitive bidding requirements (see RCW 39.04.020), it's a good idea for the emergency declaration to also waive the competitive selection process for obtaining the services of the disciplines covered under chapter 39.80 RCW (architects, engineers, landscape architects, and land surveyors). It may be necessary as part of the emergency to have some design work performed and waiving the selection procedures under chapter 39.80 RCW can help facilitate the project.

Audit Finding on Competitive Bid Laws

The Washington State Auditor’s Office has issued a finding that the Northshore Utility District in King County did not comply with public works competitive bidding requirements.

After awarding a $1.3 million project for the extension of sewer and water lines in five neighborhoods, the District issued four change orders that the auditor found “were for work not within the original scope of the project.”

The District responded by stating that the work needed to be performed in order to provide appropriate service.

For more detailed information about the finding and the District’s response, please click here.

While there is no specific state law addressing change orders, it is clear that the Auditor’s Office has determined that if, in their opinion, the work is outside the original scope of work, then it should have been bid as a separate project. This would constitute what is frequently referred to as a “cardinal change.”

One of the lessons learned from this audit is that if a public agency has an emergency project (one that is officially declared an emergency and for which competitive bidding requirements are waived), that work may be added by change order to an existing, even unrelated project. If, however, the work is not officially declared an emergency, all the normal competitive bidding requirements apply.

I have developed a training session on what are appropriate versus inappropriate types of change orders. If you are interested in discussing having me provide this training for your agency, please contact me.