August 30, 2001

Bidding procedures

With all the demands for more state funding of local projects, it’s imperative that we make the best use of every dollar that comes from the state’s coffers. Yet a couple of existing procedures work against getting the best value possible when constructing school facilities.

Problem: Bid timing

The funding of K-12 facilities in the state of Washington creates an interesting problem for school districts that are looking for state matching dollars. With appropriations currently being made in the middle of the year, school districts are forced to bid construction projects at a time that works against the competitive process and often results in higher bids.

Placing the bidding process in the late summer period usually forces construction to start in early fall. Whether the construction is on the west side of the state or the east side, starting in the fall creates a cost impact issue.

A recent survey conducted by CTA Architects Engineers of Billings, Mont., concluded that a premium of up to 10 percent is paid by projects that bid construction work in the middle of the year rather than at the beginning of the year. This survey, which polled many Northwest general and specialty contractors, documented that projects bid in February tend to get the most competition and consequently the lowest bids, while projects bid in July get the least competition and the highest bids.

The mid-year impact can be attributed to three factors:

• The contracting community does not have enough time to focus on the bid because of existing active construction work.

• Contractors already know their workload for the year, so serious competetion is of less importance to them.

• The price on materials is higher in the demand season (summer) than in the nondemand season (winter).

Solution: Change bid request dates

By moving the timing of bid requests by roughly six months, the construction industry would be in a position to help reduce the cost of school construction and do itself a favor at the same time.

Problem: Bid alternates

Bid alternates can also have a damaging effect on projects. At a minimum the process leads to confusion, and at a maximum it can result in a bid protest. Unfortunately, more and more projects are being bid using a significant number of bid alternates.

Designers tend to like this approach because it provides bid protection and sometimes relieves them from being required to redesign a project at no cost, a common feature in A/E agreements with owners. Owners tend to like the approach because it gives them the ability to add desired — but not required — scope based upon the results of the bid.

If the apparent low responsive bidder is below the budget, alternates can be added until the budget is equaled. Some even contend that the use of bid alternates actually provides the owner a means to select the contractor rather than having the selection be determined by the low responsive bidder rule.

Solution: Restructure the procedure

We can learn from others who have found ways to deal with this problem. For example, the California Legislature recently passed legislation that specifies the procedure for determining the lowest responsible bidders when alternates are included in the bid.

The Legislature recognized that when a competitively bid contract includes alternates, the awarding authority can pervert the process of selecting alternates in order to steer the contract to a favorable bidder. Yet public agencies have a legitimate purpose for including alternates in bid documents because a judicious selection of alternates can bring the cost of the project within the budget. The Legislature’s solution was to give public agencies four ways to deal with bid alternates:

• Accept the lowest bid price on the base contract without taking alternates into consideration.

• Accept the lowest bid price for the base contract plus all alternates.

• Select alternates according to a list of priorities published in the invitation to bid.

• The lowest bid is determined after a “blind” selection of alternates so that the identity of the bidders is unknown to the person who selects the alternates.

In Washington there are no established guidelines for selecting the low responsible bidder when bid alternates are part of the equation.

For example, a recent Washington K-12 project incorporated 15 bid alternates in the bid process. The contractor that submitted the lowest responsible base bid was not selected as the contractor for the project because of the selection of the bid alternates. This has become a common outcome in K-12 projects.

Making a change

Both of the above issues — bid timing and bid alternates — have adversely impacted K-12 projects in the past. With the cost of construction continually on the rise and the funds for facilities constantly being squeezed, the quality of the school construction projects can and have suffered.

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