Legislative Alerts: Procurement

Letter to the Editor:

The Pennsylvania Department of General Services (DGS) has issued an intent-to-award letter for the construction of a $178 million prison expansion project at SCI German Township in Fayette County.  The problem is the selected firm does not present the best deal for the Commonwealth – not in price, not in value and not in construction schedule.

For SCI German Township, DGS used a selection process known as Best Value Contracting (BVC).  Rather than selecting the lowest price submitted on bid day, BVC evaluates proposals based on (1) price, (2) technical credentials and (3) disadvantaged business enterprise  (DBE) participation, each of which are given weightings of 60%, 35% and 5%, respectively.  When properly used, BVC prevents the bad actors and the unscrupulous contractors from taking projects from reputable contractors simply by having the lowest bid. Regardless of the criteria used to determine best value, the process only works when the government entity evaluates non-price factors in a fair and competitive manner.

Because of the size, complexity and degree of risk, the number of firms qualified to tackle a project the magnitude of SCI German Township is limited.  The list of potential bidders was further reduced to those firms with the financial wherewithal to meet all the technical requirements and cost of preparing a design-build proposal.  Thus, only six qualified firms submitted proposals.

Unfortunately, in reviewing the proposals for this project, the DGS internal review committee made errors in scoring the technical credentials and the DBE participation of the proposer who actually offered the lowest price and best schedule.  As a result, DGS selected a proposer whose price was almost $6 million more and whose schedule was nearly three months longer than the proposer with the lowest cost and shortest schedule.

For instance, the proposer with the lowest price actually lost points for promising to finish the project earlier than required by the bid document.  For the rest of the construction industry, getting the job done early is a good thing, and owners usually reward contractors for such an effort.  Whatever the case, a contractor is never penalized for finishing a project ahead of schedule.

Also, each proposer was required to submit its best estimate of what its participation of DBEs might be.  The lowest proposer estimated that 52% of the work would be done by DBEs while the successful proposer’s number was 55%.  That small difference gained the higher proposal more points in the scoring process.  While we recognize the importance of engaging DBEs, these estimates are exactly that, estimates.  DBE participation percentages are purely subjective guesses and DGS does not and cannot verify the reasonableness of these participation levels.  Nonetheless, DGS input the guesses into the grading process and awarded points accordingly.

All of this caused DGS to select a proposer with a higher price and a longer construction schedule because it scored 1.33 points (out of a total of 1000 points) or 0.133% higher than the proposal with the lowest cost and fastest schedule.  If DGS would have followed proper BVC principles, this would never have been the case.

In our view, there is no value in awarding a construction contract for a project that is going to cost almost $6 million more and take nearly three months longer to build – especially when a technically-qualified alternative proposal clearly exists.  Therefore, we believe DGS senior officials should overrule their internal review committee and award the project to the technically -qualified contractor who offered the best price and best schedule.

Sincerely,

Terrence M. McDonough, Executive Director
General Contractors Association of Pennsylvania
20 Erford Rd, Suite 212A
Lemoyne PA  17043

Also of “budget” importance to Pennsylvania construction was the agreement to invest $600 million in capital construction and renovation projects through the Redevelopment Assistance Capital Projects program (RACP). As a result of legislation passed in conjunction with budget, funding will be made available for dozens of shovel-ready projects across the Commonwealth as well as future construction initiatives of all sizes and duration.

As a follow-up to testimony provided before the Senate Education Committee, GCAP sent a letter to the Committee reiterating the extremely positive impact a mandate waiver from the Separations Act continues to have on a major construction project at the A.W. Career Center near Pittsburgh.

GCAP confirmed for the Committee that not only did Uhl Construction’s initial bid come in lower than what the school had budgeted, but the single prime delivery method is allowing the school to do additional work that will make the building LEED certified at the silver level while still being on time and UNDER budget.

After litigation by ABC member contractors stalled a major prison expansion initiative by the Department of General Services (DGS), the Commonwealth is moving forward with a key design-build project adjacent to SCI Rockview in Centre County.

DGS will use the technical scores in bid submissions to narrow the field of potential winners to three. From there, facts and figures will be the key in determining who will build the new $181.5 million facility. While DGS specs have driven the budget way down, the most significant change from the previous RFP is that there will be no PLA requirement. A bidder may include one at his option and will receive 10 points for doing so.

The Department will follow this RFP with one for SCI Graterford later this spring (late April/early May). Like SCI Benner, the revised RFP will contain slimmed down specs to keep costs well below the previously budgeted $400 million for the project. Unlike the Centre County venture, SCI Graterford will likely have a PLA.

For more information about these projects, please call contact Terry McDonough at 717-731-6272 or email hidden; JavaScript is required.

As GCAP member contractors wait for the go-ahead to begin work for which they successfully bid, construction on six state prison expansion projects is at a stand still. At issue is how to implement the design build process supported by the Department of General Services and GCAP in light of Pennsylvania’s nonsensical Separations Act that requires the Commonwealth to hold four separate contracts for any public works construction project. This problem was largely brought to the surface as a result of litigation regarding a separate problem with public construction, project labor agreements (PLAs).

GCAP continues to have conversations with the Department and legislative leaders interested in finding a resolution to this matter. For more information about this matter, please call contact Terry McDonough at 717-731-6272 or email hidden; JavaScript is required.

GCAP primarily provides legislative monitoring and advocacy services to members of KCA, the Master Builders Association, the General Building Contractors Association and the Builders Association of Eastern Ohio and Western Pennsylvania. Additionally, the Board of Governors of GCAP does arrange to meet at least annually with representatives of state agencies to hear their proposed construction plans for the upcoming fiscal year. GCAP met with the agencies at it’s March 27th Board of Governors meeting and we have prepared a summary of projected construction projects which were presented for review.

AGC has compiled economic data which estimates the impact of $1 billion of construction spending on a state’s economy.

Coalitions Separation Act Mandate Waivers Support Letter for Act 61 Taskforce, December 18, 2008 (pdf)