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ConstructionPro Week, Volume: Construction Advisor Today - Issue: 3 - 05/14/2009

Best Practices in Bidding

The federal government’s economic stimulus plan will soon unleash a flurry of publicly funded construction projects. Some contracts will be awarded directly by the federal government, but the majority will be awarded by state and local entities. The one thing these projects have in common is that the contracts will be awarded through the competitive procurement process. Therefore, it’s a good time to review the fundamentals of sound bidding. These are concerns that should be addressed every time a bid is submitted.

Licensing and Prequalification.  Proper licensing is generally a matter of bidder responsibility, not bid responsiveness. This means a successful bidder can provide proof of licensing after bid opening and before contract award. A bid solicitation may, however, expressly require proof of licensing as a matter of bid responsiveness. These terms will be enforced, so bidders should be alert and submit documentation of licensing with the bid when required by the solicitation.

Prequalification requirements such as experience with similar projects or financial capacity pose the same issue as licensing. They relate to bidder responsibility and usually can be established after bid opening. But as with documentation of licensing, the bid solicitation may expressly require proof of prequalification at the time of bid submittal. And as with licensing, these terms will be enforced.

Timely Submittal

A late bid is a nonresponsive bid. In many jurisdictions, public project owners are not allowed to waive the timeliness requirement and are not allowed to even open or consider a late bid. Bids are frequently delivered by a third party, the postal service or a commercial courier service. The bidder’s bid package is encased in a standard envelope furnished by the courier.
It is important for bidders to remember that they are responsible for marking the exterior envelope with all the information required by the solicitation. This typically includes information such as the name of the bid opening official, a room number, the contract number and the date and time stipulated for bid opening. Many bids have been delivered to a government facility before the deadline, but have not made their way to the bid opening on time. If this resulted from inadequate information on the exterior envelope, it is the bidder’s responsibility.
The advent of electronic bidding has created new timeliness problems. Who is responsible when an e-mail transmission is delayed or the project owner’s system is down? Bidders should not assume the technology is infallible. Ideally, an electronic bid should be submitted with enough time to confirm receipt with the project owner or resubmit, if necessary, in a timely manner.

Bonding

Solicitations on public construction contracts almost always require a bid bond with the bid. Defective bid bonds are probably the single greatest cause of bid rejection. There must be a valid power of attorney giving the bonding agent authority to bind the corporate surety to the bond. A photocopied or facsimile copy of the power of attorney, lacking an original signature, may not comply with local requirements. A bid bond must also reference the correct solicitation or contract number. If it does not, the bid will be nonresponsive. Stapling the bond form to the bid is usually not considered an adequate reference in itself.
Commercial bid bond forms may not comply with the requirements of a public procurement. Limitations on the surety’s financial liability may run afoul of minimum bid security requirements. And, bond exclusions pertaining to hazardous materials, common in commercial bid bond forms, may be inconsistent with the contractual scope of work and will render the bond defective.
Acknowledging AmendmentsFailure to formally acknowledge all amendments to a bid solicitation is another common cause of bid rejection. Any amendment that changes the contractual scope of work or the legal terms and conditions of the contract is a material amendment. Acknowledgment of receipt of the amendment and acceptance of its terms is a prerequisite to a responsive bid.
Bidders should not assume that an amendment is a mere clarification or is otherwise immaterial. The best practice is to formally acknowledge every amendment in writing, regardless of its content. Amendments that have been treated as material include a change in paint color, a change in the starting time of a work shift and a five-day extension of the bid opening date. Bidders should remember that acknowledgement of a subsequent amendment to the solicitation will not cure the bidder’s failure to acknowledge a prior amendment.
Consistency with the Contract Requirements

To be responsive, a bid cannot take any exceptions to the terms of the contract. This sounds simple enough, but bidders regularly spoil their bids by "clarifying" work requirements or "commenting" on work schedules. Any explanatory notes on a bid form are red flags. They should be avoided.
Bids have been rendered nonresponsive when bidders noted that timely completion would be contingent upon certain occurrences, that the bidder assumed the public project owner would perform certain preparatory work, or that the bidder would use a particular material supplier whose product did not meet the contract requirements.

Pricing Issues

Finally, bidders must be careful to price their bids in a manner that conforms to the bid schedule and any instructions contained in the bid solicitation. If a solicitation requires the pricing of all line items, failure to do so will doom the bid. Sometimes altered work requirements have resulted in a revision to the bid schedule. Submittal of an obsolete schedule will render a bid nonresponsive. And, characterizing a price as an "allowance" will ruin a fixed-price bid.
Bidders should also beware of front-loading their bids – carrying an inordinate amount of the bid price in the early stages of the work in order to raise funds. In some jurisdictions, this is treated as imposing an unacceptable risk on the public project owner, which is cause for rejection of the bid as nonresponsive. 

 

Comments

Best practices are helpful but nothing works better than experience.

Still, listening to some "real world" anecdotes will help as well.

Posted by: Contract Management Training | 09/09/2010 at 01:00 PM

 

 

 

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