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
Contractor Performance Benchmarking
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”…
Contractor Performance Benchmarking
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.
Contractor Performance Benchmarking
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).
Contractor Performance Benchmarking
SPECIFICATION SAFEGUARDS:
• Insurance Requirements :Best Ratings Range of AAA 12+ to B+ 8.
o
o
o
o
o
o
Commercial General Liability
Workman’s Compensation (Statutory)
Automobile
Umbrella
Builder’s Risk Policy (Partially Completed Work & Operations)
Listing of Additional Insured w/Owner as Certificate Holder
• Protection of the Owner’s Property w/Logistics Plan
• Ensure Temporary Utilities Work includes Ventilation
Contractor Performance Benchmarking
SPECIFICATION SAFEGUARDS:
• Specifications define all Critical Milestones (e.g. HOW Substantial
Completion is achieved)
o No incomplete contract work
o Contractor(s) have tested all systems and they work as intended
o 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
Contractor Performance Benchmarking
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
Contractor Performance Benchmarking
SPECIFICATION SAFEGUARDS:
• 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 NonCompliant/Deficient Work satisfactorily corrected.
• Ensure “As-Builts” are kept current by being reviewed with
each pay application. Failure is a basis of denial.
Contractor Performance Benchmarking
So……We’re Good…
RIGHT?
Contractor Performance Benchmarking
No!!!
Contractor Performance Benchmarking
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.
Contractor Performance Benchmarking
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)
Contractor Performance Benchmarking
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
Contractor Performance Benchmarking
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?
Contractor Performance Benchmarking
Questions regarding Management Performance:
• 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?
Contractor Performance Benchmarking
Questions regarding Management Performance:
• 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?
Contractor Performance Benchmarking
Questions regarding Management Performance:
• 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?
Contractor Performance Benchmarking
Questions regarding Management Performance:
• 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?
Contractor Performance Benchmarking
…”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
50
%
14
%
25%
Why do we focus on 1st Cost?
1st
Cost
O&M
Financin
g
Renovatio
ns
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 Pitfall
Design-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.