City of Lincoln
Mayor's OfficeOsborn Protest Decision
Mayor's Office
lincoln.ne.gov
3/9/2010
The record needs to be set straight.
Some have disputed the awarding of the Stevens Creek Basin Trunk Sewer Phase II project to an out-of-state contractor, Garney Companies Construction. They have argued publicly that the decision was flawed. There are many rumors and opinions, but only one set of facts. I want to take this opportunity to present those facts and the reasoning of the City in making our decision.
The Stevens Creek project is partially financed by $2.5 million in federal stimulus funds and $2.5 million in State Revolving Loan funds (also stimulus-related), monies that would have to be replaced by local dollars if federal rules are not properly followed. The stimulus rules are rigid, and any error or delay could cause the City to lose these funds.
Nine companies submitted bids on the Stevens Creek project. The bidders received detailed, written instructions and attended a pre-bid meeting where they were told that an award had to be made by February 12th to meet the stimulus timeline. It was emphasized that the City had to maintain the schedule to keep the stimulus dollars.
The stimulus funding rules also are unforgiving on the issue of local provider preferences. When using federal stimulus dollars, the City cannot choose a local provider of goods and services simply because it is local. A bidder must be the lowest, responsible bidder, regardless of its location.
Nor can local contractors be favored under Nebraska State Statute. Some may think it would be a boon to Lincoln if the law allowed the City to consider the value of using local labor and local suppliers in deciding to award City contracts. But policymakers recognized that all communities would adopt similar limitations in their local markets, essentially freezing our Lincoln contractors out of doing business in those communities. Open competitive markets are healthier for taxpayers and contractors.
The project's private sector professional licensed engineers determined that specific types of pipe material and design were necessary to ensure the reliability and durability of the Stevens Creek sewer system. The engineers were designing a project that has to last over 100 years with negligible risk of failure to the pipeline system.
Pipe design and selection by the City and its consulting private sector engineers has been a point of contention locally. A Lincoln manufacturer produces a reinforced concrete pipe. To accommodate this local manufacturer, the City changed the bidding specifications to allow a "deductive alternative." Under this option, a bidder could offer an alternative pipe design other than the two specific pipe design options in the base bid. However, the bidder would have to demonstrate that the alternative had the strength, resistance to cracking, and ability to seal properly necessary to be safely employed. A licensed professional engineer's certification was required to be submitted with the deductive alternative bid.
It is critical that a licensed professional engineer certify that the deductive alternative meets design requirements and standards. When it comes to the protection of water quality and public health and safety, the City cannot simply take the word of a bidder. We insist on an evaluation from qualified, licensed professional engineers. The cost of repair or replacement for even one joint of an active sewer of this size could cost hundreds of thousands of dollars.
T.J. Osborn Construction, Inc. was the only bidder to submit a "deductive alternative." But the firm's submission listed only a dollar amount. The option Osborn proposed was $160,000 lower than the base bid of the next lowest bidder, but the bid did not include the required certification as to the pipe's suitability.
Terry Osborn of T.J. Osborn Construction orally indicated to the Purchasing Agent after the bid opening that he would submit the other documentation later. Two days later, an undated two-page letter addressed to a person at the local concrete pipe manufacturing company from Dr. Maher Tadros was sent by fax to the City Purchasing Agent's office. The letter did not contain the required information necessary to review the proposed alternative, much less approve it.
Without the proper certification as to the reliability and safety of the alternative design and time running out for the deadline to maintain the stimulus dollars, the Purchasing Agent had no choice. If he had asked for more supporting information, he would have violated City code regarding non-responsive bids, jeopardizing $5 million in stimulus funds. In addition, he would have exposed the City to a lawsuit from other bidders who would have a plausible claim that a local bidder did not meet the bid timeline requirements and thus was given preferential treatment.
The Purchasing Agent correctly determined that Osborn's bid was non-responsive. He awarded the contract to the firm that submitted the lowest, responsible and responsive bid that met the requirements and specifications, Garney Companies Construction.
T.J. Osborn Construction, Inc. protested the award to Garney and argued two issues. First, they argued its "deductive alternate" bid should have been accepted by the City and second, that Garney was allowed to submit demographic information after the bid closed at 5:00 p.m. January 20th, 2010. Osborn's protest argued that if the City waived one irregularity, then it has to waive all irregularities, and thus should have considered the Osborn late submittal.
Garney did provide "minority owned, women owned and disadvantaged business enterprise (MBE/WBE/DBE)" documentation after the bid closing. MBE/WBE/DBE information is necessary to meet the legal requirements for bidding federally funded projects. MBE/WBE/DBE information has nothing to do with the safety or reliability of the project. The bid documents clearly allow any bidder to submit MBE/WBE/DBE materials at any time prior to the actual award of the contract. It is NOT required prior to the submission of the bid.
The Purchasing Agent determined that Osborn did not follow the bidding directions in submitting its deductive alternative proposal and that the City could not consider the late submittal. Osborn's argument that the City waived something to allow Garney to submit MBE/WBE/DBE material was factually incorrect. Garney correctly followed the bid specifications. Based on these facts, the Purchasing Agent denied the protest.
T.J. Osborn Construction, Inc. then appealed the Purchasing Agent decision to the City's Appeals Procurement Board. The Appeals Procurement Board was comprised of a professional purchasing agent, a local attorney and a local contractor. They voted 2 to 1 to support the Osborn protest. The Appeals Board specifically found that the City's Purchasing Agent acted within his authority and followed the intent of the specifications. But in a contradictory statement, two members also recommended that the Public Works & Utilities Department ignore the action they just deemed to be correct and evaluate the late Osborn alternative. There was no further explanation of their thought process. The Board essentially said the Purchasing Agent had acted appropriately but they wanted the City to review the Osborn bid anyway.
The inconsistency of the Board majority's recommendation is highlighted by the dissenting opinion of the only professional purchasing agent on the Board. The dissent agreed with the City Purchasing Agent's determination that Osborn did not follow the bid instructions and thus had to be deemed "non-responsive." The dissent further found that Garney's MBE/WBE/DBE submittal was appropriately filed and also pointed out that the Board was only authorized to deal with those two issues and nothing more. Both the dissent and the majority opinion uphold the City Purchasing Agent's authority to deny the Osborn claim.
The City's protest process now moves to the Mayor for a final decision. The Code provides that the Mayor shall consider the recommendations of the City Purchasing Agent, the Appeals Board and the Public Works & Utilities Director in coming to a final resolution. In making my decision I have to be aware of a variety of issues, some of which are reflected in the various recommendations and some of which are not.
First, there are issues of public safety and the use of best engineering practices. Lincoln's sewers and water system mains and piping must last in excess of 100 years with no problems. We must follow the guidance of qualified, licensed professional engineers with respect to the materials and designs used on projects for the public good. They must be tested, submitted to engineering scrutiny and proven effective before we will allow their placement and use on City projects. We must have complete details, plans signed by a qualified and licensed engineer, test results and reference projects where these materials have been used. If Osborn's proposed product had met these standards, we should have heard about it well before the projects were bid so that we could have made an informed evaluation in a timely manner.
Secondly, the integrity of the bidding process must be maintained not only for the issue before me now but for the future as well. Allowing bidders to make major substantive changes after the deadline provides an unfair advantage and undermines the process. There must be fairness to all bidders in the process or they simply will stop bidding on City projects. Accepting Osborn's late and incomplete submission would have changed his bid from the seventh lowest bid to the lowest bid. It is undisputed that Osborn didn't follow the bid directions in submitting documents that are crucial in determining the reliability and safety of the project.
Is this a minor irregularity? The recommendations of the City Purchasing Agent, the Public Works & Utilities Director, the City's consulting engineers, Black & Veatch and Olsson & Associates, and the dissenting opinion of the only professional purchasing agent on the Appeals Board all agree. It is NOT a minor irregularity and the bid should NOT be considered. The entire Appeals Board agreed that the City Purchasing Agent acted within his authority and properly followed the intent of the bidding requirements and specifications.
Thirdly, there are risks involved on this project that are much higher than those projects where only local dollars are used. The stimulus provisions required that the contracts be awarded prior to the February deadline or the Administrator was to use the funds somewhere else. If we were to now award a contract to Osborn, we would have two certainties:
The facts are clear. My duty is to examine those facts and follow their logical conclusion for the good of the public. That's why I cannot support the bid protest of T.J. Osborn Construction, Inc. The Purchasing Agent was right, and I uphold his decision.
Chris Beutler
Mayor of Lincoln