Out of the sight and mind of most taxpayers, important construction projects affecting their futures are being decided in a demanding, exciting and sometimes frustrating world of costs, schedules, deadlines and the unexpected.
This is the contract process –– deciding who works on highway or building projects, what they will do and when it will be done. Millions of dollars are at stake. Contracts may be lost because of a misplaced decimal point or because the contractor submits a bid one minute late.
Here’s a look at the world of contracts and some of the unusual things that can happen.
The formal contract process appears simple, though it often involves a ton a work.
First, of course, the plans must be approved. Highway and bridge projects may take years to finalize.
For instance, states such as New Jersey, Missouri, Georgia or Colorado, may include a highway under a five-year plan, making a commitment to complete the work within that time. Once the project is programmed for funds, the state begins a long development process, clearing environmental hurdles and preparing a preliminary design.
Working with local communities and metropolitan planning organizations, a state will outline a work program and fund it through federal and state dollars (80 percent federal, 20 percent state for highway construction).
The program will usually designate when a project will be “let,” or when a state will accept bids. The state department of transportation will then put out a bid package, advertising the project for a certain period, like 30 days, via publications and perhaps the Internet, which has become a growing trend.
The bid document is often long. It includes standard “boilerplate” directions plus information specific to the particular project. Larger highway construction contracts may include more than 400 items covering road or bridgework, broken down into sections such as length, lanes and width of right of way.
Sometimes the request for bid is sent directly to a list of prequalified bidders. Mistakes happen.
“I personally received a solicitation to submit a bid,” said David Mendes, director of communications for the American Subcontractors Association (ASA) in Alexandria, VA. “We’re a trade association, not a contractor. Clearly people were not doing their homework. Two weeks ago we also received a request for bid from an agency somewhere in Virginia which wanted us to build a tennis court.”
Some states require that a contractor be “pre-qualified,” completing an application and being approved to bid on certain types of work, like major bridge categories, drainage or grading, and within a certain dollar amount.
Sometimes there also is a pre-bid meeting to explain the project and learn more about the qualifications of new contractors.
Qualified bidders responding to the bid request will call or fax the Department of Transportation (DOT) requesting plans, specifications and the bidding document. In turn, the DOT will send them the document, which may be written or on a compact disk.
Before the day of the letting, contractors will return a diskette with the bid, which is frequently prepared with the aid of a program called EXPEDITE. They also return a printout of the bid.
A growing number of states have implemented, or are establishing, systems in which the bids are submitted via an Internet site, using a program called EXPRESS. Among those using or implementing such systems: Pennsylvania, Maryland, Virginia, Georgia, Florida, North Carolina, Missouri, Texas and California.
Bids must be returned before a certain time on the letting day.
Each bidder also must submit security for bids of more than a certain amount. Typically 5 percent of the bid, the security may be in the form of a bid bond, cashier’s check, certified check or even cash.
“Not submitting bid security is a huge fatal error,” said Georgia Russell, assistant team leader of the Contracts Awards Team in the Maryland State Highway Administration (SHA) Office of Construction, Baltimore, MD. “You need to show you’re serious and will do the work if you win. Technically, we can take that bond if the contractor withdraws.”
At a predetermined day and time, the DOT, in a room full of witnesses, will unlock a steel box containing the sealed-bid envelopes inside proposal books.
Rarely will a bidder submit cash for the bid security, but Russell saw it happen about four years ago when the highway administration’s bid box was opened.
“A highway contractor put $7,000 in cash in the sealed bid as the bid security,” she recalled. “That was the only time it ever happened, and it was kind of shocking when we opened the envelope. We said ’Oh, there’s cash in here!’ We escorted the bidder to the cashier’s office to turn the cash into a check.”
The DOT’s contract verification staff and/or computer software system will analyze each bid, noting any items that haven’t been completed. The contract administration staff may have 20 or more people.
If everything passes muster, the contract goes to the lowest bidder, who must then furnish a performance bond, which is 100 percent of the contract, guaranteeing that the job will be done right. If contractor performance doesn’t measure up, the DOT can go to the surety company, which will “pick up the pieces,” furnish another vendor and pay to complete the work.
Just a Decimal Point
A few years ago, a contractor misplaced a decimal point in a bid to the Delaware Department of Transportation (DelDOT) for a highway project.
“Instead of being the apparent low bidder, the company became the second low bidder,” said Michell Ackles, public affairs officer of the DOT in Dover, DE. “It became a big issue. Our legal folks decided that the written part of the bid, which described the number correctly, was correct and had precedence, so the contractor got the work after all.”
John Eustis, DelDOT’s contracting officer, gives other rueful examples: “A bidder may not have rounded correctly, which brings the value of the bid bond below the required 10 percent. We must, under state law, throw out the bid. I’ve had some bid bonds as little as 11 cents too low. It may be 9.9999 percent, but it’s still not 10 percent. This type of mistake doesn’t happen very often any more because bidders know I mean business and because we’ve tried to make the bidding process as idiot-proof as possible. I once had a very wise man tell me: ’You can make things idiot-proof, but you can’t make them fool-proof.’”
Eustis got another shock recently.
“The most unusual bid I’ve ever received was when a person chose not to use the contract document which we require,” he said. “Instead, he wrote his bid prices on the face of our advertisement which listed the items and quantities. I sent him a letter quoting the specification requiring our forms.”
If such mistakes happen, Eustis said, they’re generally on smaller contracts.
“A bidder may multiply incorrectly, for instance, changing the value of a bid on an equipment contract where you’re buying 20 dump trucks,” he said. “Errors may be as simple as someone just truncating, making 96.78 to be 96.7 rather than 96.8.”
How do contractors react when a bid, in effect, is “bounced”?
“You may get ranting and raving for a few minutes but they eventually just accept it,” Eustis said.
Sense and Cents
The state of Maryland will correct simple, obvious errors where the contractor’s intent is absolutely clear.
“Common sense obviously prevails,” said Maryland Highway Administration’s Russell. “If they added an extra zero inside the bid for an item which should be $10, but their extension [unit price times quantity] on the face of the bid is apparent and obvious, we will go with what they first said for the extension price.
“However, there are times when bidders do not add up their items correctly or forget to include an item in their totals, bidding $1 million, for instance, instead of $1.5 million. They won’t be disqualified but they can lose their bid and be in second place. We have to make that tragic phone call and show them where the error occurred. They cannot correct the bid, and, if an item is left blank, we do not let them add it in. When we install our electronic bidding system, it will greatly reduce such mistakes.”
Bids are based on quantity –– so many tons of hot mix, or cubic yards of concrete –– a contractor has to add and multiply correctly.
Juanita Moore, manager of contract administration for the Florida DOT (FDOT) in Tallahassee, FL, for the past 11 years, said transposition errors, such as typing 123 instead of 213, occasionally happen, though electronic bidding makes them rare.
Catching the Train
Completing bids, and making the deadline, can be nerve wracking for contractors, especially when it becomes a last-minute rush. Sometimes they miss the train.
If the bidder is even a minute late, the bid isn’t accepted.
“We had more last minute stuff seven or eight years ago before we utilized computer technology so extensively,” Moore said. “Contractors would bring all their bids to Tallahassee. You would hear the screeching of brakes in the parking lot if they got in before our 10:30 a.m. deadline. I’ve had some show up at 10:35. Too bad. Now, because of advancements in our computer technology, we allow contracts to submit bids at any of our district offices, so everyone is usually on time.”
Moore said she “really enjoys seeing the bids come in on time and then traveling around the state seeing the highways being built; it’s very satisfying when you see them completed after the whole process.”
Commented Charles Johnson, contractual services manager with the FDOT: “Occasionally, we’ve had people come in late with bids, like 3:01 p.m. instead of the 3 p.m. deadline. We receive them, but we can’t consider them. If they hand us the bids, they’re ours and become public record but they won’t be considered. If they don’t hand it to us, that’s okay, too. They may make a fuss, but they understand it because another time they may be the vendor that’s on time when the other vendor comes in late.
“When you’re sitting on the other side of the table from eight vendors which have put theirs in on time, and one comes in late, they’ll watch you. You better NOT accept it. We have to make sure that we’re very, very consistent.”
(Johnson’s department advertises all its projects on the Internet. It also will soon be able to receive proposals electronically, on a system installed last April, as well as by mail.)
“We have an audible signal at 12 noon on Thursdays, which is our deadline for submitting bids,” said Maryland’s Russell. “Once the tone sounds, we don’t accept bids under any circumstances. It’s too late, even if a bidder is running down the street, has a flat tire or his mother died. It wouldn’t be fair to the other bidders to accept a proposal after the deadline.”
Missouri’s Line in the Sand
“The contract process is very prescribed,” commented Bob Brendel, outreach coordinator, project development, for the Missouri DOT (MoOT) in Jefferson City, MO.
“When you’re dealing with public funds, you want to make sure there’s no window left open, which would hint that there’s any impropriety at all. Anytime you’re bound by law to take a low bid, the person who was second-low thinks there must be something wrong with the guy who was low. You have to eliminate all those questions by following a very rigid process.”
Brendel said any number of things can invalidate a bid in Missouri, including failing to sign a bid or signing it in pencil.
Asked how such errant bidders react, Brendel said, “We get all sorts of responses. However, you can’t negotiate with somebody during the bid process because, as soon as you do that, somebody else can say ’I made a mistake, too, and I would like my opportunity.’ You have to have a line in the sand somewhere, and set a baseline.”
Brendel said, “There is somewhat of a sense of urgency during the bid process. The planning process takes years, and, quite often, on very large jobs, the construction process can also take years. When you get to that stage where you’re ready to award a contract, it’s kind of the light at the end of the tunnel. You finally see something being implemented which has been envisioned for awhile.”