For this week’s Guest Post Friday here at Musings, we welcome Harold (Hal) Good, CPPO. Hal is the director of Purchasing for Frederick County Government and First Vice President of the National Purchasing Institute, (NPI). Prior positions include: Director of Procurement and Contracting for the city of Palm Springs, California and materials management related positions at New York University Medical Center. Hal has served as national president of the Airport Purchasing Group, (APG) and president of the California Chapter of the National Institute of Governmental Purchasing (NIGP).
Hal’s public construction contracting experience includes managing solicitation processes for selection of design professionals, and contracting for major construction projects such as Palm Springs Convention Center, Palm Springs International Airport Main Terminal, Palm Springs Skate Park, Tahquitz Creek/Arnold Palmer Championship Golf course and Lake Linganore (MD) Communities utility and paving project.
Public purchasing agents like the writer cope with some problems on an exaggerated scale in a down economy such, as we are currently experiencing. Contractors, who under normal conditions find sufficient opportunities contracting within the private sector, develop an interest in pursuing public projects when activity in the private sector significantly decreases. Add that to the fact that the number of public construction projects is also decreasing so bidders become tempted to bid on contracts whose scope of work is outside their normal core expertise and experience.
The influx of “new” contractors competing with the existing “regulars” results in more bids and decreased odds of success for all participants in the typical public process where bids are awarded to “the lowest responsive responsible bidder”. Increased competition tends to force bidding with smaller profit margins. At first glance, that would appear to be good news for the public “owner”. However, in all too many cases, if the contract is awarded to a contractor who is working in an unfamiliar environment taking on a scope of work for which they have little or no experience, the result can be unfortunate both for the contractor and the public agency. The “losers” are not confined to the owner and the contractor who bid too low. An additional loser is the contractor who “should have been” the successful awardee and would have been if the bid process would have protected all participants by limiting the participants in the bid process to contractors demonstrably qualified to perform the work.
In the opinion of this writer, the public owner, thus the taxpayer, and those contractors possessing the requisite qualifications and experience to perform the work, all benefit when the bid process is limited to competition among true peers.
How then do we accomplish this? One method, and the one successfully utilized by the writer, is pre-qualification of contractors. Pre-qualification provides a level playing field through establishment of uniform rating systems to determine the minimum requirements permitted to bid either on a specific project carrying unique project specific requirements, or, on a class of projects carrying a common set of requirements. The pre-qualification process is typically completed sufficiently in advance of the release of the bidding documents to include the names of the pre-qualified contractors in the Invitation to Bid. This feature, in itself, carries advantages in the fact that subcontractors and suppliers can identify all of the potential bidders increasing the competition at these tier levels. Bid spreads in pre-qualification processes known to the writer tend to be tighter.
Firms taking the time to go through a project specific pre-qualification process tend to actually bid the project on a much higher percentage of the time in the experience of the writer. This fact, combined with the use of mandatory pre-bid conferences and site visits, can be of significant value when bidding complex projects or those carrying unusual requirements where effective pre bid communication with potential bidders is important.
The State of California provides an online set of model pre-qualification documents which, while crafted to conform to California code, are easily adapted to use by agencies outside California. The documents may be downloaded at www.dir.ca.gov/od_pub/prequal/PubWksPreQualModel.doc
The writer has utilized pre-qualification processes successfully for numerous construction projects including all of the projects referenced in his bio all of which were completed on time and within budget.
Pre-qualification processes are not permitted in some jurisdictions. In jurisdictions where pre-qualification is an option and construction bids carry the requirement for award to the lowest responsive and responsible bidder, pre-qualification can be of significant value. The value is enhanced when utilized for complex projects, those requiring unique experience and/ or accelerated deadlines.
Helpful Links
www.publiconstructionlaw.com/Prequalification.htm
www.virginiadot.org/business/const/prequal.asp
www.dot.state.il.us/const/prequalapp.html
Hal and I welcome your comments below. Also, please subscribe to keep up with this and other Guest Post Friday Musings.
Hal do you have some thoughts on how well prequalification works for a series of procurements? Coming as I do from an IT services environment, I’ve seen instances where, when prequalification is used in connection with multiple procurements, the likelihood increases as the number and size of procurements increases that more and more variability will creep into the process and this results in the need to set up an infrastructure around the prequalification process just to maintain it. This ends up adding to the overall cost of the procurement process and I would think at some point it makes more sense to do bidder qualification on a procurement by procurement basis.
Thanks for checking in Dennis. I’m sure that Hal will have something great to say about this.
Dennis, Excellent points! Pre-qualification processes need t occur in a structured environment. There is a need in my opinion to have some be project specific and other applicable to a class of projects. The more specialized and complex require the former. Pre-qualification is applicable as you suggest to more than construction. In a very real sense pre-qualification is rolled into step one of multi-step processes.
Pre qual is just another bureaucratic mountain that does nothing except make the process more complex. The low bid process has worked just fine for decades and gives good value to the tax payer and opportunity for the bidders. Bonding is the ultimate protection against performance/payment failures. Having competent architects, owners and other professionals involved is what produces a good project. You want to prequal the guy in the field, how about prequal for the guys behind the desks! Incompetence is usually the ultimate reason a project goes south.
Thanks for checking in John.