CONTRACTING BID MISTAKES
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- Amelia Hopkins
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1 CONTRACTING BID MISTAKES 15 1
2 Contracting Bid Mistakes 10:00 am to 2:30 pm February 4 - Renton February 11 - Camas February 17 - Yakima February 24 Everett 2
3 Contract administrators are very serious types who would never stoop. to using a dancing Spiderman in a presentation!
4 Linda Shilley Contract Administrator Port of Olympia (360) John Carpita, P.E. Public Works Consultant MRSC (206)
5 Today s Agenda: 10:00-10:15 Intro, Overview, Housekeeping 10:15 12:00 Contracting Bid Mistakes Agency Bid Mistakes Emergency contracting Why Bid It? Know Your Bid Parameters Its Just Maintenance Do I Have to Bid It? Tips for Receiving Conforming Bids What to Include in Bid Documents to Minimize Bidder Mistakes and Protests: 5
6 Today s Agenda continued: Contractor Bid Mistakes Lump Sum vs Unit Priced Bid Items Unbalanced Bids Bid Schedule vs Schedule of Values Competitive Bid Exemptions: Special Facility or Market Condition Sole Source 6
7 Today s Agenda continued. 12:00 1:00 Lunch on your Own 1:00 2:30 Breakout Sessions 10 Scenarios to work through in Small Groups and Report Back to the Assemblage. 7
8 Bid Law Exemptions per RCW Competitive bidding procedures may be waived by resolution of the governing body of the municipality for: Purchases that are clearly and legitimately limited to a single (sole) source of supply Purchases involving special facilities or market conditions Purchases in the event of emergency Purchases of insurance or bonds Public works contracts in the event of an emergency
9 Exemptions Competitive bidding procedures may be waived under the preceding circumstances by adopting either: a resolution at the time of contracting; or by written policies beforehand. A resolution must state the factual basis for the exception.
10 Exemptions If written policies are used to waive competitive bidding requirements, the contract and a factual basis for the exception must be recorded and open to public inspection immediately after a contract is awarded under those policies.
11 Emergency Public Works Contracts An emergency is defined, uniformly for all classes and types of municipalities, as unforeseen circumstances beyond the control of the municipality that either: present a real, immediate threat to the proper performance of essential functions or will likely result in material loss or damage to property, bodily injury, or loss of life if immediate action is not taken
12 Emergency Public Works Contract RCW (2) (b) Designated person within the municipality declares an emergency situation exists, waives competitive bidding requirements, and awards all necessary contracts (2) (b) A written finding of the existence of an emergency must be made by the governing body or its designee and duly entered of record no later than two weeks following the award of the contract
13 Does the SAO look at emergency contracts? Yes The Town did not solicit bids for the Pennsylvania Avenue South water main project. The project included a water line extension and electrical work for new homes. The Council approved the project as an emergency repair; however, it does not meet the requirements of an emergency repair and should have been competitively bid. 13
14 Emergency Public Works Contracts Who in your agency is authorized to declare an emergency? How about: Prevailing wages Insurance Bonds Established Unit Prices Force Account Project Closeout Items
15 To Bid or Not to Bid. That is the Question. 15
16 Why Bid Laws? Bid laws were established to prevent fraud, collusion, favoritism, or improvidence in the awarding of public contracts enable local governments to obtain the best work or supplies at the most reasonable prices provide a fair forum for bidders limit the dollar volume of public works contracts performed by public agencies 16
17 Know Your Bid Parameters: Each Public Agency type has specific requirements State statutes may not always be clear Internal Policies may tighten State requirements In Resource Packet: Contracting Corner How to Live With Your Agency s Bid and Day Labor Limits 17
18 18
19 Examples of Bid Parameters: RCW : Any second-class city or any town may construct any public works, as defined in RCW , by contract or day labor without calling for bids if <= $65K & 1+ craft, or <= $40K & 1 craft. RCW (water/sewer districts): All work ordered, the estimated cost of which is in excess of fifty thousand dollars, shall be let by contract and competitive bidding. 19
20 Example of Ambiguity: Ports Only Bid Parameters: RCW s Not Clear for Ports: Port of Longview to SAO office: May Ports adopt a policy that exempts the competitive bidding of public works contracts for projects estimated at less than $300,000? 20
21 Ports Only Bid Parameters: SAO Response: There is no bottom threshold for ports, meaning every public works project from $0 and up has to be bid unless the small works roster is adopted., Cited RCW
22 Ports Only Bid Parameters: RCW (2)(b) For all contracts related to work meeting the definition of "public work" in RCW (4) that are estimated at three hundred thousand dollars or less, a port district may let contracts using the small works roster process under RCW in lieu of advertising for bids. 22
23 Ports Only Bid Parameters: RCW (2)(b) The use of may is not requiring use of the small works roster, but rather giving the Port an option. Port of Olympia to SAO office: Which statute requires Ports to competitively bid public works estimated at less than $300,000? 23
24 Ports Only Bid Parameters: SAO Response: For audit purposes, we would expect the Port District to either use a small works roster process described in RCW or advertise for bids for public works projects below $300,000. Lesson Learned: Know your Agencies Bid Parameters, and if in doubt Ask! 24
25 Public Works Mysteries My department doesn t do public work projects! We do parks and install recreation equipment Just installing a new telephone system We re just moving the wall 5 feet over, is all It s not our money: we got a 100% donation This is work that our crews would normally do, but we re short-handed Which leads to the big question:
26 Is Maintenance a Public Work? "Public work" means all work, construction, alteration, repair, or improvement other than ordinary maintenance RCW Public work includes maintenance when performed by contract (WAC ) Maintenance is defined as keeping existing facilities in good usable, operational condition. WAC (7)(a)(iv) 26
27 Is Maintenance a Public Work? Ordinary Maintenance means work not performed by contract and that is performed by the regular employees of the Port on a regularly scheduled basis (e.g. daily, weekly, monthly, seasonally, semiannually, annually) to service, check, or replace items that are not broken; or work not performed by contract that is not regularly scheduled but is required to keep existing infrastructure in good usable, operational condition. RCW exempts the regular employees of the Port from the prevailing wage requirements in RCW Maintenance work by contractors is not Ordinary Maintenance. Laura Hermann, Labor & Industries 27
28 Tips for Receiving Conforming Bids: Fewer bid items means less room for error One place for signature/stamp Clear instructions for completing bid form Include Trench Safety System as separate bid item when required Include space/blank lines for HVAC, Plumbing, and Electrical Subcontractor names for projects estimated at $1 million or more 28
29 Tips for Receiving Conforming Bids: Limit number of forms Include Statements/Certifications within Bid Form above signature line, such as: Non-Collusion Affidavit Federal Debarment Certification Federal EEO/DBE Statements Buy American Declaration Agency specific Certifications/Declarations 29
30 Tips for Receiving Conforming Bids: Checklist of Common Subcontractor s List Bid Guaranty Timeliness of bid submittal Signature on the bid Bid price submitted on all required items Mandatory pre-bid site meeting Addenda acknowledgement Documents to be submitted with the bid
31 Tips for Receiving Conforming Bids: Using Additive and Alternate Bid Items Additive: New bid item added in separate table Alternate: Replaces other bid item. Clearly identify when and if Owner will incorporate item(s) into evaluation of bid. 31
32 Avoid Protests: Include in Bid Documents Requirements & Checklist for Responsive/Responsible Bids Must Contractors name itself or Subcontractor or write in N/A for HVAC, Electrical, and Plumbing? Or Can they leave line blank if no related work required. Can Contractors submit names of Subcontractors within 1 hour of bid time; or is it required at bid time? 32
33 Avoid Protests: Include in Bid Documents What official clock will be used for establishing bid time? And where is it located? Clear instructions for bid drop location. Instructions/Examples for Reciprocal Bid Preference Calculations for out of state Contractor bids. 33
34 Avoid Protests: Include in Bid Documents Detailed Supplemental Bidder Responsibility criteria, including required proof and basis for evaluation. Bid Guarantee required: Bond or Cashier s Check What are acceptable methods of submitting bid: Sealed, envelope marked appropriately Electronic OK? (know the statutes) Original signature or stamp? Original Bid Bond required, or copy OK? 34
35 Avoid Protests: Include in Bid Documents Reasons Bid may be Rejected What Can you Waive as an Irregularity? What Are your Options if: One Bid is Received No Bid is Received Identical Bids are Received 35
36 Avoid Protests: Include in Bid Documents Reasons Bid may be Rejected What Can you Waive as an Irregularity? What Are your Options if: One Bid is Received No Bid is Received Identical Bids are Received 36
37 Avoid Protests: Include in Bid Documents Well defined Basis of Award/Low Bidder Evaluation Method Total of Base Bid, Plus Additive? Other Tables? Don t Accept Conditioned or Qualified Bids 37
38 Conditioned or Qualified Bids Bid Form: Modifying Bid Form Not using required Bid Form Not completing Bid Form Scope of Work: Bidding on work not specified Not bidding on all work specified Bidding Documents: Conditioning the bid price, scope, schedule or conditions Noting exclusions to the bid that are required in the bidding documents. 38
39 Conditioned or Qualified Bids Do all comments on the Bid Form or accompanying letter automatically condition a bid? 39
40 Conditioned or Qualified Bids What happens if a bidder conditions its bid? Non-responsive bid Appeal from low bidder if bid found non-responsive Bid protest from second low bidder 40
41 Conditioned or Qualified Bids What do your bidding documents state? FORM OF BID Bids shall be submitted on the forms provided by the Section All blanks on the bid forms shall be filled in by ink or typed. Alterations, erasures, or interlineations within the blanks, if any, shall be in ink and initialed by the signer of the Bid. The bidder shall make no deletions, additional conditions or stipulations on the bid form or qualify its Bid in any manner. 41
42 Basis of Award Real Example The apparent low bidder, for purpose of award, shall be the responsive and responsible bidder offering the low aggregate amount for the base bid plus selected additive or deductive bid alternates and meeting all other bid submittal requirements. Owner could manipulate totals to select a specific Contractor. 42
43 Additive and Deductive Bids METHOD OF AWARD - LOWEST RESPONSIBLE BIDDER: If the bidding documents for this project require alternate prices, additive and/or deductible alternates shall be listed on the alternates bid form provided by the Principal Representative. Bidders should note the Method of Award is applicable to this Bid as stated below. A. DEDUCTIBLE ALTERNATES: The lowest responsible Bid, taking into account the Colorado resident bidder preference provision of Colorado law, will be determined by and the contract will be awarded on the base bid combined with deductible alternates, deducted in numerical order in which they are listed in the alternates bid form provided by the Principal Representative. The subtraction of alternates shall result in a sum total within available funds. If this bid exceeds such amount, the right is reserved to reject all bids. An equal number of alternates shall be subtracted from the base bid of each bidder within funds available for purposes of determining the lowest responsible bidder. 43
44 Additive and Deductive Bids B. ADDITIVE ALTERNATES: The lowest responsible Bid, taking into account the Colorado resident bidder preference provision of Colorado law, will be determined by and the contract will be awarded on the base bid plus all additive alternates added in the numerical order in which they are listed in the alternates bid form provided by the Principal Representative. The addition of alternates shall result in a sum total within available funds. If this bid exceeds such amount, the right is reserved to reject all bids. An equal number of alternates shall be added to the base bid of each bidder within funds available for purposes of determining the lowest responsible bidder. C. DEDUCTIBLE AND ADDITIVE ALTERNATES: Additive alternates will not be used if deductible alternates are used and deductible alternates will not be used if additive alternates are used. 44
45 Basis of Award Real Example Award of Contract will be made by the Commission based upon any combination of the base bid and alternates which, in the Commission s sole discretion, is in the Commission s best interest considering price, schedule and other factors. (italics and bold added) 45
46 Basis of Award Real Example The Owner will evaluate bids in the following manner to determine the lowest bid that falls within the project budget: A. Sch A Base Bid Only B. Sch A & Sch B Item B-1 C. Sch A, Sch B Item B-1, and Sch B Item B- 2 46
47 Single Bid Received Example: If the Port receives a single responsive, responsible Bid, the Port shall have the right, in its sole discretion, to conduct a price or cost analysis on such Bid. The bidder shall promptly provide all cost or pricing data, documentation and explanation requested by the Port to assist in such analysis. By conducting such analysis, the Port shall not be obligated to accept the single Bid; the Port reserves the right to reject such Bid or any portion thereof. 47
48 No Bids Received Example: For Contracts estimated to cost less than $300,000, where the Port receives no bids, the Port shall have the right, in its sole discretion, to award a contract to a responsible Contractor chosen from the Small Works Roster. The Contract amount shall be at a negotiated price that does not exceed 10% of the published Engineer s estimate, and in no case shall the contract award exceed $300,
49 Identical Bid Totals WSDOT: Bidders draw slips of paper from a box. One marked Winner the other(s) marked Unsuccessful. Bidders draw in alphabetical order by name of firm. 49
50 Electronic Bids: RCW allows: (c) Procedures shall be established for securing telephone, written, or electronic quotations from contractors on the appropriate small works roster.. What about Contracts > $300,000? 50
51 Electronic Bids: RCW (New in 2014) (1) Any state agency authorized to conduct public works contracting and competitive bidding under this chapter may do so electronically and may use or accept electronic signatures in these processes. 51
52 Electronic Bids: (b) "State agency" means any state office or activity of the executive and judicial branches of state government, including state departments, offices, divisions, boards, commissions, institutions of higher education as defined in RCW 28B , and correctional and other types of institutions. 52
53 Electronic Bids: RCW Amended in 2015: Electronic signature means an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record. 53
54 Electronic Bids: Why not other Agencies? Contact your legislators, and/or lobbying groups to have others included in statute. *HB
55 Lump Sum vs Unit Priced Bid Items: Lump Sum: Involves a total fixed price for all construction related activities. Preferred when a clear scope and a defined schedule exists. Can require a Schedule of Values for quantifying payments. 55
56 Lump Sum vs Unit Price Bid Items Lump Sum Advantages: Owner has assigned most risk to the Contractor Contractor may try to complete faster; maximizes production & performance Easier for Contractor to complete bid form Minimizes calculation errors on bid 56
57 Lump Sum vs Unit Price Bid Items Lump Sum Advantages: Owner supervision is reduced Cost known at outset Contractor will assign best personnel 57
58 Lump Sum vs Unit Price Bid Items Lump Sum Disadvantages: Change orders difficult to quantify Contractor bids higher for unforeseen contingencies Requires complete specifications & design Delays more costly Higher chance of dispute: Is the work included or not? 58
59 Lump Sum vs Unit Price Bid Items Unit Price Advantages: Predefined cost for individual items of work Change orders minimized quantities increased or decreased during construction Doesn t require 100% Design Contractor paid for actuals: Tangible and measurable results for Owner Lower risk for Contractor means lower prices 59
60 Lump Sum vs Unit Price Bid Items Unit Price Disadvantages: No total final price known at outset Requires more Owner supervision/oversight Owner at risk if labor hours is a Unit Re-negotiate for rates sometimes difficult Owner should be confident in estimated quantities 60
61 Lump Sum vs Unit Price Bid Items Unit Price Disadvantages: Increased owner time to verify and record bids Higher risk for Contractor errors on bid form: Blanks Calculations Changes not initialed 61
62 Lump Sum vs Unit Price Bid Items Unit Price Disadvantages: Unbalanced bids: An unbalanced bid is where Contractors raise prices on certain items and make corresponding reductions of the prices of other items, without changing the total amount of the bid. May happen when Owner s estimated bid quantity varies greatly from Contractor s estimated final construction quantity. 62
63 Unbalanced Bids: Washington law requires rejection of nonresponsive bids A bid that varies materially from the Invitation for Bids or provides the bidder an advantage is nonresponsive. Unbalancing of bids constitutes a material irregularity. Material irregularities are non-waivable and bids should be Rejected as non-responsive. Awarding to an unbalanced bidder will not result in lowest prices to the awarding agency. 63
64 Unbalanced Bids: Owners recognize unbalanced bids are grounds for a rejection of such a bid. WDSOT Specification provides that a bid may be declared irregular and rejected if unbalanced when: Any of the unit prices are excessively unbalanced (either above or below the amount of a reasonable bid), to the potential detriment of the Contracting Agency. 64
65 Unbalanced Bids Real Life Example: Owner estimated quantity of contaminated soils removal at 300% lower than actual quantity. Low bidder recognized this prior to bid Unit price was triple other bidders Contractor refused to re-negotiate unit price What are the Owner s options? 65
66 Quantify Progress of Lump Sum Bids by Requiring a Schedule of Values 66
67 Bid Schedule vs Schedule of Values Bid Schedule: The schedule, or list, of items on the bid form. 67
68 Bid Schedule vs Schedule of Values Schedule of Values (SOV): The schedule, or list of items, with cost, provided by the winning Contractor for the Owner s review and approval, to be used for progress payments. 68
69 Schedule of Values Include language in specifications requiring submittal with signed contract, bonds and insurance Can include pre-defined sample SOV in bid documents Use for separating costs between locations, buildings, streets, etc. to capture costs in lieu of multi-page bid form. 69
70 Schedule of Values Easily identify front-loaded or unbalanced items. Negotiate changes to SOV and approve as method for quantifying progress payments. 70
71 Bid Protest Process: Competitive bidding Written protests Notice of contract execution. When a municipality receives a written protest from a bidder for a public works project which is the subject of competitive bids, the municipality shall not execute a contract for the project with anyone other than the protesting bidder without first providing at least two full business days' written notice of the municipality's intent to execute a contract for the project; provided that the protesting bidder submits notice in writing of its protest no later than two full business days following bid opening. Intermediate Saturdays, Sundays, and legal holidays are not counted. 71
72 Bidder Claiming Error Competitive bidding Bidder claiming error. A low bidder on a public works project who claims error and fails to enter into a contract is prohibited from bidding on the same project if a second or subsequent call for bids is made for the project. 72
73 Bid Law Exemptions per RCW Competitive bidding procedures may be waived by resolution of the governing body of the municipality for: Purchases that are clearly and legitimately limited to a single (sole) source of supply Purchases involving special facilities or market conditions Purchases in the event of emergency Purchases of insurance or bonds Public works contracts in the event of an emergency
74 Special Facility or Market Conditions & Sole Source Under RCW Sole source and special market condition exemptions apply only to purchases and not public works contracts. (Should be obvious, but ) 74
75 Special Facilites or Market Conditions Rationale Really, really, really good deal that is only available for a very short time. Very good price on an exceptional piece of used equipment.
76 Auctions RCW : Any municipality: May purchase any supplies, equipment, or materials at auctions by: Any federal, state, or local government Any private party without public bidding if the items can be obtained at a competitive price Preapproval of an upper bidding limit by the Manager/Council/Commission is advisable
77 < As Designed With Change Orders V
78 78
79 Questions?
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