Bidder Responsibility Done Wrong – Part II: Bitter Consequences for Taxpayers and Contractors

This post is the second part of a two-part post concerning the bidder responsibility issues in Washington State under RCW 39.04.350 (Part one can be found here). This blog will address two subjects: “changing the criteria prior to bid” and “determining compliance with the responsibility criteria.”

1. Changing The Supplemental Bidder Responsibility Criteria Prior To Bid.

Under RCW 39.04.350(2)(b), a potential bidder may request the public entity modify its supplemental criteria. Narrowly tailored supplemental bidder criteria will limit the number of contractors or subcontractors submitting bids, which limits competition and drives prices up. A contractor can successfully challenge narrowly tailored bidder criteria to expand competition to the benefit of the construction community and taxpayers.

Supplemental criteria may be changed prior to bid at the request of a potential bidder. If a Supplemental criterion is changed, the public works owner will issue an addendum which makes the change available to all bidders on the project. The statute contains no guidelines as to how to bring about such a modification. The attached materials (CPARB Bidder Responsibility Workshop (3/10/11) [click here]) contain some examples of changes made to supplemental criteria on a critical Port of Seattle runway paving project.

2. Runway 16L Reconstruction Project: Example of modified Supplemental Bidder Responsibility Criteria Before Bid Opening:

(a) The original IFB language did not contain sufficiently specific language concerning participation of joint venture partners on prior projects. Because the criteria of partner participation was not defined, contractors who had been members of joint ventures in the past did not want to be put to the expense of bidding if the bids could be rejected. In response to an inquiry from the construction community, the Port of Seattle modified its criteria.

 

Original IFB Language

References may be asked to rate the performance of and describe their experience with project team members, subcontractors, the Bidder, and/or members of the Joint Venture (JV) or other similar Business Organizational Structure (BOS) such as a partnership or limited liability partnership. Information may be solicited and evaluated on the following subjects: type and features of work; overall quality of project performance and quality of work; experience and technical knowledge and competence of the Bidder and Project Team Members; ability, capacity and skill to perform the Work; compliance with laws, ordinances, and contract provisions; and other information as deemed necessary by the Port of Seattle.

 

 

Revised IFB Language

A. In the event that a Bidder (or any other firm about whom the Port has requested qualifications information) intends to rely on the experience of any other legal entity to satisfy the requirements of this Document, Bidder shall as part of its submittal clearly demonstrate why the experience of the other legal entity should be attributed to it (or the other firm about whom the Port has requested qualifications information). By way of example (and not limitation):

1. If Bidder is the successor to an entity meeting the requirements of this Document, Bidder shall clearly demonstrate why the experience of the predecessor firm should be attributed to Bidder.

2. Similarly, if Bidder was a participant in a legal entity (whether partnership, joint venture, limited liability company, corporation or other business form) formed by two or more contractors meeting the requirements of this Document, Bidder shall clearly demonstrate why the experience of that other legal entity should be attributed to Bidder.

3. If Bidder is a legal entity (whether partnership, joint venture, limited liability company, corporation or other business form) formed by two or more contractors and intends to rely on the experience of one or more of its members/partners to satisfy the requirements of this Document, Bidder shall clearly establish why the experience of the member(s)/partner(s) should be attributed to the joint venture or other legal entity.

B. In addition, in the event that Bidder is a legal entity (whether partnership, joint venture, limited liability company, corporation or other business form) formed by two or more contractors, Bidder shall specifically supply the information requested by this Document for each member/partner in the legal entity. Without limitation, this requirement specifically applies to requests related to experience, Bond Forfeitures (as defined below), contract history and criminal history, as further indicated below. The Port specifically reserves the right to find a Bidder formed by two or more contractors not responsible based on the conduct of less than all of the members/partners.

C. Without limiting the generality of any other requirements in this Paragraph Q1-01.02, if the Bidder is a legal entity (whether partnership, joint venture, limited liability company, corporation or other business form) formed by two or more contractors, the Bidder shall submit the additional following information:

1. A copy of the agreement and any related documents establishing the relationship of the parties;

2. Description of the business relationship between the parties;

3. Description of the specific roles and responsibilities each member/partner of the Bidder will have in relation to this Contract; and,

4. List of past projects where the members/partners worked together in the past and indicate the roles and responsibilities of each member in relation to that project.

D. In the event that Bidder is a legal entity (whether partnership, joint venture, limited liability company, corporation or other business form) formed by two or more contractors, the requirements of this Section QI-01.02 specifically apply without regard to whether the legal entity (whether partnership, joint venture, limited liability company, corporation or other business form) was formed specifically for this Project or not.

 

(b) The IFB as written provided that a bidder had to demonstrate that it had engaged in construction projects greater than ten (10) months. Prior Puget Sound area runway paving projects generally had not exceeded ten (10) months in duration, as runways are closed only for short durations and runway paving projects are done on an expedited basis. When this issue was brought to the Port’s attention, the Port issued an addendum which changed the “duration” of the project to one of “scope.” The scope of 75,000 sq. yds of paving became determinative, rather than project duration. In response, the project’s specific scope of work rather than a non-germane criterion such as duration was used to gauge responsibility.

Original IFB Language

A. For purposes of this section, the elements of “Similar in Scope and Complexity” is a project having the following elements:

1. Airfield Runway/Taxiway construction;

2. Construction schedule greater than 10 months

 

Revised IFB Language

A. For purposes of this Document 00440, the elements of “Similar in Scope and Complexity” is a project having the following elements:

Airfield Runway/Taxiway/ Apron construction on an active airfield that included at least (a) 75,000 square yards of P-501 Portland Concrete Cement Pavement or (b) 75,000 tons of Asphalt Pavement.

 

(c) The IFB provided that prospective bidders must have completed no fewer than two (2) projects in the last five (5) years of over $30 million. When the construction community advised the Port of Seattle that one to two local contractors could meet that stringent requirement, many contractors had successfully performed two (2) or more airport runway projects within the last ten (10) years. In response, the Port modified the criterion and increased the term from five (5) years to ten (10) years, and eliminated the $30 million size requirement in favor of a more specific scope.

Original IFB Language

A. General Contractor. The Bidder shall demonstrate successful past experience and competence in managing no less than 2 construction projects within the last 5 years each with an initial construction value of at least 30 million dollars and that meet the Similar in Scope and Complexity elements listed in Paragraph QI-01.02 above. To qualify as a project, the Owner must have determined the project to be substantially complete or issued final acceptance.

Revised IFBLanguage

A. General Contractor. The Bidder shall demonstrate successful past experience and competence in managing no less than 2 construction projects within the last 10 years and that meet the Similar in Scope and Complexity elements listed in Paragraph QI-01.02 above.

 

The result of the modifications was uniformly beneficial to both the Port and prospective bidders. By opening the procurement to more bidders and increasing competition, the Port decreased the cost of the project, resulting in significant taxpayer savings. The Port obtained a quality project completed on schedule. This is an example of how changing the supplemental responsibility criteria before bids are opened works to the benefit of both contractors and public owners.

3. Recommendation.

Bidders interested in modifying the supplemental bidder criteria should begin that process early and do so in writing. Submit the Request for Change in writing to the public works owner as soon as possible. Do not wait until the last minute. Waiting increases the chances of failure. In our experience, most public owners are receptive to modifications that increase competition; however, if not, we recommend that prospective bidders involve industry organizations such as the Associated General Contractors (AGC), Utility Contractors Association of Washington (UCAW), the National Electrical Contractors Association (NECA), the Mechanical Contractors Association (MCA), or the Sheetmetal and Air-conditioning Contractors of North America (SMACNA). The involvement of an industry group generally raises awareness of the project and prompts even reluctant owners to modify overly stringent criteria.

4. When Is The Determination Made That The Bidder Complied With The Supplemental Responsibility Criteria?

Prior to submitting the bid, the bidder should understand which method the public works owner will employ when evaluating bidder responsibility. If a prospective bidder fails to challenge the supplemental criteria, or challenges the criteria and no modification is made in a timely manner, can the bid nevertheless be awarded if the prospective bidder does not strictly comply with the supplemental responsibility criteria? Does the owner have discretion to waive minor shortcomings in the bidder responsibility criteria after bids are open? There are two schools of thought in owner organizations as to when the determination of a responsible bidder is made:

(a.) The Pass/Fail Position. Some owners take the position that bidders either strictly comply with the supplemental criteria, and if bidders fail to comply with any aspect of the supplemental criteria, that failure renders the bid non-responsive.

The advantage of this position is fewer bid protests for owners. The disadvantage is that these owners may lose low responsive responsible bidders, and it may cost the owners more to procure work in the long run.

(b.) Discretionary Position. Some owners take the position that the determination of compliance with the supplemental criteria is reserved to the discretion to the public works owner. If after bids are open, the public works owners in this camp reason that the bidder substantially complied with the supplemental criteria, but perhaps did not strictly comply therewith, these owners will accept the bid and award the contract to the contractor even though strict compliance with the supplemental criteria was not made.

The advantage of this position is that competition is opened up to more contractors. The disadvantage is that there could be potential bid protests.

Owner representatives in both camps spoke at the March CPARB seminar, and neither indicated that they had encountered problems in advancing either position. It is important, however, for prospective bidders to understand when the responsibility decision will be made. Submitting a bid that does not strictly comply with the supplemental criteria to a “pass/fail” owner will simply result in a rejection of the bid. If the bidder is low, they will have incurred the bid preparation costs without recourse.

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