ConstructionPro Week, Volume: 3 - Issue: 45 - 11/07/2014

Should Contractor-Financed Projects Be Competitively Bid?

By Bruce Jervis

Pressing needs for infrastructure and other public facilities, combined with limited funding sources, are changing the way public projects are financed. Increasingly, the constructor is also the financier, compensated through lease payments, tolls, or other user fees.

These new project arrangements have proved challenging to the public procurement system. The bidding laws in many states have been slow to keep pace. Some states, however, have been proactive. A recent challenge to a lease-leaseback arrangement in California was squarely addressed by the procurement statutes. The procurement was exempt from competitive bidding.

Is this a good thing? Bidding laws are intended to maintain fair, open competition, avoiding favoritism and assuring the taxpaying public of the best value. Awarding large contracts through non-competitive channels calls these principles into question. Should competitive procurement requirements apply to constructor-financed projects? Is this even feasible? I welcome your comments.

COMMENTS

Not enough information. Was the Prime contractor chosen from competing firms? Is there a Scope of Work? Is there a guaranteed maximum price? If the answer is yes, to all three questions, then on the face of it public money is protected and the Prime Contractor should be able to procure subs as they see fit...Surely a Prime will seek multiple quotes to help their bottom line, even if the sub-quotes are not publicly bid. If the answer to any of the 3 questions is no, then public money is not protected.
Posted by: W. Jody Heady, AIA - Friday, November 7, 2014 1:36 PM

all public jobs should be competetive
Posted by: hope - Friday, November 7, 2014 2:40 PM

This is a complicated question, and depends partly on the project and partly the procuring agency. Contractor financed projects are inherently less open, simply because far fewer contractors have the capacity to finance what they build.

In some cases the the public entity itself does not have the capacity to finance the project, and contractor financing provides a viable alternative. The selection process can and should be open, competitive and and fair at the prime contractor level.

Public bid laws typically seek to to maintain fair and open competition, without favoritism. But, they almost never assure best value. More often they serve to protect the public construction industry more than the public. Public agencies need more flexibility than they usually have, to deliver projects which are not only well priced at bid opening, but are also completed within the budget, and are of high quality and utility.
Posted by: Eden Milroy AIA - Saturday, November 8, 2014 2:18 PM