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Monday, March 8, 2010

Procurement controversies -- Colorado, USA

Protest postpones award of bid for Glenwood Springs wastewater plant
An Aurora-based manufacturing company of water and wastewater equipment is questioning the validity of the bid process regarding the equipment to be used in the Glenwood Springs Wastewater Treatment Plant.

Kristy Schloss, president of Schloss Engineered Equipment Inc., told Glenwood City Councilors Thursday that she and her attorney believe that a sole-source provision included in the bid document specifying the equipment to be installed in the facility excludes a competitive bid process.

However, according to City Engineer Mike McDill, substitutions could be made if equipment specifications matched the city's request. “If a contractor wants to use another equipment manufacturer, that [meets] the specifications the city requests, the city would be willing to do that,” McDill said.

McDill said, the bid process does not exclude competitive bidding because the bid document specifies Vulcan or an “approved equivalent” that fits the project's design and process. where a facility is built around specific equipment, it's common to include a sole-source provision for that specific portion of the contract.

“You have to design the spaces around the specific dimensions of equipment,” McDill said. “And the process rate of the equipment has to closely match the rate of other equipment. They have to work together.”

COMMENT:

A primary principle of procurement is to promote competition. Specifications should not normally be drafted to favor one proprietary product.

Where specifications are written to describe a particular brand name "or equivalent", under Guam's version of the Model Procurement Code, the specifications must also identify at least three alternate brand name products which would satisfy the minimum needs.

Under that rule, if the Authority considered the protestor's product to be equivalent it should have said so. Failure to make that clear seems, in the facts of this case as recited in the article, to have significantly prejudiced the bidder in the eyes of some of the project contractors. The article noted " the majority of bidding contractors refused to review her company's bid, or list Schloss Engineered Equipment as a valued engineer substitution". And it's hard to blame the contracts, who could reasonably be expected to try to stick to products stated to be suited to the specifications; only one of five such contractors was willing to take the chance.

This case is excellent for pointing to the tensions arising in this circumstance, and it is often won on how the issue is framed. Here, the Authority has framed the issue as requiring a selective piece of equipment to fit within a broader project. It might alternatively be asked whether cost considerations favor altering the broader project if the cost savings in allowing alternate equipment is greater.

Those are factual issues, but whether that analysis was done or even considered weighs on the legal duty of the authority to maximize its purchasing value in a given instance while balancing that against the duty to promote broad-based competition for longer term savings.

There is a technical, procedural issue in this case, also. The protestor was not a bidder on the project. The bidders were contractors, and the protestor was a potential supplier for those contractors. In some jurisdictions, the protestor's interests may be considered too remote to constitute standing to bring a protest.


POST SCRIPT:


Glenwood Springs City Council OKs contract for wastewater plant
City Council unanimously approved the award of the wastewater treatment plant bid Thursday night at its regular scheduled meeting.

Council awarded the contract to Salida-based Moltz Construction at a low bid of $22.3 million.

Council postponed award of the bid twice, once in December after federal legislation required the bid to include a Davis-Bacon prevailing wage requirement after it had already been bid out.

Council then postponed the award again at its March 4 meeting, after a second round of bids had been returned by five of the six previous contractors, due to a protest from an Aurora-based water and wastewater equipment manufacturer questioning the validity of the bid process.

Out of the five bids that were returned, three slightly increased from the original bids, and two came back lower than the original bids. Moltz's second bid was $1.5 million lower than its original bid.

The numbers were a welcomed surprise since the Davis-Bacon requirement was estimated to increase the price of the contract.


COMMENT:

The complaint is often made that protests should be eliminated because the increased time and inconvenience adds unnecessary cost to the system.

Here it can be seen that an effective protest resolution process enhances open competition and can thereby result in lower bid prices.

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