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Procurement Best Practices – Part 2
Maximizing the value of your time and resources.
In this second installment in our series focusing on “Procurement Best Practices” we continue exploring various facets of the procurement process and how authorities and other public agencies, as well as their consultants, can adopt a renewed view on various aspects of the bidding process.
Continuously implementing a best practices approach will ultimately promote efficiencies and risk management while reducing total project costs.
Does Anybody Really Know What Time It Is?
While most agencies consider the timing of projects as it relates to their specific operational and financial needs, few think of how their timeline may coincide with projects of adjoining agencies, potentially affecting available resources and the bidder pool. This is especially true if agencies are trying to leverage pricing of smaller vendors and contractors that may have limited resources or bonding capacity. If several geographically close authorities bid similar projects at the same time, it is possible that each may receive fewer bids, which affects the competitive nature of the process.
Discussing your projects in advance with other agencies and bidders alike may help promote timing that benefits everyone.
Another opportunity to reduce overall expenditure and secure the highest quality contractors relates to scheduling off-season construction. In some situations, perhaps most, this option might not be viable for a variety of reasons like roadway or bus route constraints, coordination with other utilities, requirements for permanent roadway repair within a certain timeline, etc.
For projects where bulk construction can be completed off-season and permanent paving completed the following spring, there could be significant cost savings as the contractors can keep their employees working longer through the year.
So, what is the right amount of time to offer bidders to prepare their submissions, or to address addenda or changes in scope?
Most agency owners and consultants are fully aware of the legal requirements; however, realities of project complexity, time of year volume, and time for sourcing materials and subcontractors all play important roles in how much time should be provided. If vendors do not have adequate time to respond appropriately, they will likely inflate their costs to account for things they haven’t fully thought through. While there are no set rules for the “correct amount of time,” a minimum of 15-20 days from advertisement to due date, and a minimum of 3-5 days from issuance of final addenda, are typically sufficient.
Time in a Bottle
The time given to vendors and bidders to respond, along with reasonable pre-bidding requirements, is an important consideration that can have significant impacts on project pricing and smooth execution. Starting early in the bidding cycle, let’s examine the pre-bid meeting.
From late winter through late spring, an estimator or small business owner can be preparing bids for 30-40 projects at the same time. Both voluntary and mandatory pre-bid meetings can be important project elements when dealing with more complex situations such as congested utility space, difficult traffic and pedestrian control, and the coordination of multiple prime contractors. However, if a pre-bid meeting is mainly used to determine project interest or for bidder filtering, owners and consultants should truly examine its value and need.
An alternative might be to require bidders to visit the site or offer more than one opportunity to meet with the project owner or consultant to discuss details. This might mean a little more work on the design professionals but could have significant payoff once bids are received. One final point about pre-bid meetings – a huge percentage are held mid-week in the middle of the day. This timing can be detrimental to the potential bidders, especially to smaller firms. Perhaps holding pre-bid meetings outside of “prime time” is a better decision.
You Can’t Always Get What You Want
To promote good pricing, especially on construction projects, always ensure that details cannot be misinterpreted by bidders, or have descriptions which are inappropriately intended to cut costs.
For example, if you assume a road restoration width of 3 feet because that is the extent of the excavation, and you are placing the burden of additional restoration on the contractor knowing that a greater area will be damaged due to heavy vehicle activities, they will simply adjust their unit pricing to account for the potential added damage. More times than not, if bidders do not see the scope and/or related details as realistic, costs will be inflated to compensate.
Another pricing element to consider involves including alternates, adds, or deducts for certain items. This can be especially useful if you have submissions where scope items could be interpreted differently, or to show bidders you understand that some variables that affect pricing could occur.
Since this offers the notion that you might negotiate reasonable change orders equitably, bidders are less likely to inflate pricing as a preventative measure against rejected change order requests. One way to sort out these variables is to conduct a constructability review prior to advertising and releasing a bid. This will help to identify areas that may look good on paper but will not translate cost-effectively in the real world.
Come Together!
Many authorities have had great successes in reducing project costs by working alongside other agencies to leverage volume pricing on a variety of projects. From chemical and commodities purchasing to construction projects, some solicitations for goods and services that are similar in nature can likely be bid jointly to give vendors an opportunity to provide economies of scale.
This approach may require additional language clarifying payment responsibilities, timing of projects or other conditions that are unique to each party involved. These issues are generally not insurmountable and may well afford cost savings that outweigh the additional up-front effort.
Pipe Dreams
Utility Coordination Meetings, usually organized by the local PaDOT District, should absolutely be attended by all authorities whose infrastructure resides within road right-of-way. These meetings fundamentally assure that the utilities within a proposed area of paving or other highway improvements are given the opportunity to repair, relocate, or replace their facilities prior to the road- way being paved.
The upside is that the authority generally does not pay for any permanent paving work. On the downside, if these opportunities are missed, there can be significant consequences if a utility owner disturbs the new roadway within a certain timeframe.
So, if even some of these tips and suggestions are followed, you may just find that you can stretch your dollars a little further than you ever thought possible – and that’s music to anyone’s ears.