Getting 'best value' from your contracts
In the not-too-distant past, contracting for public projects meant soliciting three bids, and the lowest bidder got the contract. The idea behind this approach was to discourage favoritism and fraud, and to encourage competition; however, the objective criteria used to determine contract awards often led to protests and project delays. Holly Newman Mackall, of Crounse & Moore PLC, offered an overview of the new statute that now governs the awarding of contracts, referred to as the “best-value method of procurement.” The rule allows the use of subjective criteria, which allows flexibility in bid awards.
Newman Mackall made her comments at the City Engineers Association of Minnesota (CEAM) annual conference on January 28, 2009.
The new rule recognizes that quality-based selection for contractors can decrease project costs. “Costs are reduced because the new rule helps to minimize claims, excessive RFPs, and change orders and decreases the odds of getting bids from contractors who are in over their heads,” Newman Mackall explained.
The statutory definition of best-value procurement is based on a method that considers both price and performance criteria. This policy is based on nine criteria such as vendor quality, timeliness, customer satisfaction, and performance. The contents of the bid solicitation must list the criteria and indicate how each criterion is weighted, and the bidder interview must be disclosed.
According to Newman Mackall, the new procurement method will be phased in. “The first two years, 2008 and 2009, states, counties, cities, and the top 25 percent of school districts will be required to follow the statute; in 2009, the top 50 percent of school districts will be included, and by 2010, the rule will apply to townships and the remaining school districts.”
During the first three years of this process, one project annually or 20 percent of projects, whichever is greater, will be subject to the bestvalue method. Training is required for those who prepare or bid solicitation documents. (Thus far, however, there are no funds allocated via the statute to set up a training source.)
John Gorder from the City of Eagan described the city’s experience with a best-value contracting project. “The traditional low bid process meant sending the bid out there, and we’d expect the worst but hope for the best,” he said. In 2004, the city established its own set of bidder qualifications and used a point system to evaluate bids. Gorder said the process has yielded success in that the city has had no rejections to date and has experienced better project supervision.
Gorder outlined some lessons learned from Eagan’s experience with best-value contracting: check references before awarding the contract; train those involved with the bidding process; involve public works and finance staff; and hold a pre-bid meeting for contractors to explain the project as well as the criteria that will be used. Gorder said Eagan will continue using the bestvalue contracting process this year on other projects.
— Jeanne Engelmann, LTAP freelancer