how to avoid pitfalls when you must select the lowest bidder

How To Avoid Pitfalls When You Must Select

The Lowest Bidder

Presented by:

Kenneth M. Florey – Robbins Schwartz Nicholas Lifton & Taylor,

Timothy J. McGrath, AIA, ALA – BLDD Architects, Inc.John R. Robinson III – Performance Services

Legal Aspects of the Bidding Process

• Awarding the Bid – Criteria

– Lowest

– Responsive

• Material Defects – Nonwaivable

• Minor Variances – Waivable

– Responsible

– When is Acceptance?

– Pre-qualification of Bidders

Legal Aspects of the Bidding Process

• Rejecting the Bid

–Discretion “to reject any and all bids.”

–Documenting the Basis for Awarding/Rejecting Bid

– Constitutionally Impermissible Basis for Rejecting Bids

All Contractors & Vendors…

•are equally qualified to perform my project

•have the same expertise to execute my project

•are equally dedicated to the success of my project

•will provide the same value to my district

•will be equally responsive to addressing any problems

Contractor Performance Benchmarking

Contractors…

…”They’re ALL the same, what difference does it make, whomever is cheapest”…


Where do we start?....

By Understanding what Contractors do….

•Manage the Building Process to Facilitate the Construction of the Work and

•Construct the Work in compliance with the requirements of the Contract.


SPECIFICATION SAFEGUARDS:

•Pre-Qualify Contractor(s) either through CDB Pre-qualification process and/or AIA Document A305.

•Require Owner & A/E references on 3-5 previous projects (w/in last 5 years) of similar scope, size & complexity.

•Require contact information on last 3-5 projects. (Look for gaps)

•Always require Labor & Material Performance Bond from the Contractor(s) Best Ratings-Bond Rating Range of AAA 12+ to B+ 8.

•Always require a Bid Bond from the Contractor(s).



•Insurance Requirements :Best Ratings Range of AAA 12+ to B+ 8.

o Commercial General Liabilityo Workman’s Compensation (Statutory)o Automobileo Umbrellao Builder’s Risk Policy (Partially Completed Work & Operations)o Listing of Additional Insured w/Owner as Certificate Holder

•Protection of the Owner’s Property w/Logistics Plan

•Ensure Temporary Utilities Work includes Ventilation



•Specifications define all Critical Milestones (e.g. HOW Substantial Completion is achieved)

o No incomplete contract worko Contractor(s) have tested all systems and they work as intendedo No liens against the job

•Avoid “or equal”, specify EXACTLY what you want and narrow list of acceptable manufacturers who can provide it (3-4 max+-)

•Hold Mandatory Pre-Bid meeting w/minutes attached to contract as an Exhibit

•Hold Detailed Scope Review Meetings with 2-3 lowest bidders w/minutes attached to contract as an Exhibit


Detailed Scope Review Meetings:

•A/E develops detailed questionnaire targeting each contractor and the scopes of work required by the project.

•Architect led w/all Consultants present.

•Invite 2-3 lowest General Contractors + all of the major and critical work sub-contractors.

•Review ALL of the major subs in front of the General Contractor. Record ALL responses to all questions. Attach as an Exhibit to the Construction Contract



•Ensure that there is a Quality Assurance/Quality Control Article in every technical section that cites accepted industry standards.

•Require that all Pay Applications have current Lien Waivers from all entities requesting payment. Failure is a basis of denial.

•Require retainage on ALL Pay Applications to ensure all Non-Compliant/Deficient Work satisfactorily corrected.

•Ensure “As-Builts” are kept current by being reviewed with each pay application. Failure is a basis of denial.


So……We’re Good…

RIGHT?


No!!!


What is the NEED?...

•Establish consistent standard of acceptable quality of work from ALL Contractors doing work for K-12 School Districts

•Create scale-able mechanism to systematically track Contractor and Vendor performance for Illinois K-12 School Districts.

•Dis-incent the “bad apples” from continuing to game the system thru “low-ball” bids to win work.


Critical Project Issues Requiring Diligent Management:

1)Submission of Insurance Certificates & Bonds

2)Daily Oversight of Field Personnel

3)Project Schedules

4)Timely & Accurate Administrative Paperwork

5)Requests for Information (RFI’s)


6)Pay Application Process

7)Change Order Process (CCD’s, RFP’s CO’s)

8)Testing/Validation (Commissioning) of the Work

9)Punch-list Process

10)Close-out Process w/Warranties


Questions regarding Management Performance:

•Did Contractor attend the Pre-Bid Meeting?

•Did Contractor submit ANY questions to the A/E during bidding?

•Did Contractor fully scope review Sub-contractors prior to bid?

•Were Insurance Certificates and Bonds provided in a timely manner that allowed the Owner to issue a Notice to Proceed in accordance with the required completion date?

•Was the Schedule of Values (SOV) created and submitted in accordance w/the Contract Documents?



•Was the Project Construction Schedule created and properly managed?

•Was the Submittals Schedule created and properly managed?

•Did Contractor provide and manage a Weekly Field Work Plan? Was the plan continuously shared with the Owner and A/E?

•Was the Subcontractor’s work properly coordinated & executed?

•Were any Recovery Plans needed? If so why? Did they work?



•Were communications open and honest with expectations accurately established and managed? If not, why?

•Did Contractor adhere to the Submittal Schedule?

•Did Contractor provide the required submittals (Product literature, testing reports, shop drawings, In-Progress “As-Builts” etc…) Was their actions timely?

•Did Contractor pick up the A/E’s comments and make corrections and revisions to their submittals? Were their actions timely?



•Did Contractor submit timely & accurate Draft Pay Applications?

•Did Contractor and Sub-contractors submit Certified Payrolls?

•Did Contractor and Sub-contractors submit accurate lien waivers with pay applications?

•Did Contractor submit unwarranted Change Orders?

•Were Requests for CO submitted timely relative to “discovery”?

•Was the Contractor’s pricing fair market value?



•Did Contractor vet Sub-contractors claims prior and preview with the A/E prior to submitting?

•Were accurate “As-Builts” compiled during the project?

•Were final “As-Builts” delivered w/in 30 days of completion?

•Were all Warranties delivered w/in 30 days of final completion?

•Were all final lien waivers accurately submitted in a timely manner?


…”Would you recommend this Contractor Again?”…


Pitfalls in the Low Bid Procurement Process

• Poorly Written Specifications

– Too vague, not specific

– Holes in Specs that could lead to change orders

• Equipment and Contractor Selection

– Lowest responsible bidder

– Equipment selection not based on performance, but price

50-Year Lifecycle Cost of a Typical Building

O & M, 1st Cost, Financing, Renovations

14%

25%

50%

Why do we focus on 1st Cost?

1st Cost

Financing

Renovations

O & M

Building it Right!

• HVAC systems usually account for about 20% of the project but causes the greatest close-out issues.

• Single design, lowest responsible bid drives project.

How to Avoid the PitfallDesign-Build Guaranteed Energy Savings

Contract• Multiple designs to choose from based on performance

first, rather than on first cost.

• Standardizes equipment selection.

• Selects favored contractors the District has positive experiences with, and ability to negotiate after bidding to get the best price.

• Can specify desired outcome, such as temperature, CO2 levels, light levels, mechanical noise, humidity.

• All competitively bid with multiple companies and subs.

Guaranteed Energy Savings Contracts – A Better Way To

Buy!• Best utilized in HVAC/Mechanical system

upgrades, new construction and renovations.

• Best solution is selected, not lowest responsible bidder.

• No upfront costs to the District

Guaranteed Energy Savings Contracts – A Better Way To

Buy!• No Change Orders – Design-Build company

owns both design and construction.

• Continuous M & V, commissioning process guarantees performance and savings are realized to the District.

• Detailed drawings - includes the price and scope – points lists, types and quantities of equipment, lighting surveys, etc.

how to avoid pitfalls when you must select the lowest bidder

Documents

lowest general contractors

critical work subcontractors

scopes of work

bidsall contractors

bid bond

best ratings range of

lowest bidders wminutes

lowest bidderpresented