| Jenefer Youngfield School Construction Inspection Specialist 801-538-7669 801-538-7729 (fax) |
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6. Bidding ProcessRevised 26 June 2007
The bidding process is one of the most important steps in the construction of a new facility or the remodeling of an existing facility. If not done properly, the process can create legal problems that must be resolved prior to beginning construction. a. Preparation Prior to bidding, key decisions should have been made. Decisions such as who the design team will be and what type of construction contract will be used should have been determined. Will the project be bid as a Construction Management Contract, Lowest Competitive Bid, Restricted Bidding Contract, Value Based Procurement or other? Competitive Bidding is the most common for the construction of public buildings. However, Construction Management has been utilized frequently with great success. This allows the owner the option of pre-selecting a contractor based on qualifications, rather than just on fees. The contractor is then available to assist the architect-engineer and owner in the design and budget process. The State Building Board has set its facilities procurement standard on a modified Value Based Procurement process developed by Dr. Dean Kashiwagi at Arizona State University. Value Based procurement embraces a partnered, on-budget, on-time delivery process wherein everyone concerned works towards common goals. Dr. Kashiwagi developed the Performance Based Studies Research Group (PBSRG) at Arizona State University's Del E. Webb School of Construction in 1994. The PBSRG is a nonprofit research group with the following goals: • Reduce the life cycle cost of a project.
More information on Performance Based procurement may be obtained at the following Web sites: If a method other than Lowest Competitive Bid is selected, then it is possible for the owner to pre-qualify bidders. When pre-qualifying for public projects, the qualifications usually depend on the financial stability of the bidding company and the scope of projects the company has completed in the past. A surety company may also be required to certify that the bidder is capable of bonding for the required dollar amount of the project. An example of the pre-qualification information for a contractor to submit can be found in American Institute of Architects (AIA) Document A305. b. Bid Documents Bidding documents should include the following: ● Advertisement or invitation to bid Bid documents should be made available to the bidder in their entirety. Making only portions of documents available can result in inaccurate bids, as several documents may contain vital information relating to a particular segment of work needed for an accurate bid. The architect can assist the owner in providing the correct number of documents needed by the contractor to obtain bids. All plan holders and/or bidders should register their addresses, phone numbers, and contact persons with the architect. This information will be used for the purpose of issuing addenda, document tracking, and deposit refunding, which are natural parts of the bidding process. c. Bid Advertisement For public work, the law requires that bids be advertised twice during ten working days. This is usually done in local newspapers or other publications as determined by school district or charter school purchasing agents. It is generally advantageous to the owner to advertise in a bid service such as the Intermountain Contractor, or other bid service publications. The architect should also prepare the bid form for the owner. The form should be concise and filled in completely by the bidder. d. Deposits When distributing bid documents out to bidders, the owner or architect should collect a deposit to ensure the return and condition of all contract documents. Here is a sample Bid Bond Document. These documents will later be turned over to the successful bidding agent to be distributed to their subcontractors. In the event that a bidder does not return the bid documents, their deposit is forfeited. The deposit should approximately equal the amount required to reproduce the documents. e. Insurance All contractors and subcontractors must provide–at minimum–Workers Compensation Insurance. Most contractors and subcontractors also carry Commercial General Liability Insurance, Automobile Liability Insurance, Aircraft Liability Insurance (if applicable) and Valuable Papers and Records Insurance (if applicable). The State of Utah, through the Division of Risk Management, has instituted a statewide Owner Controlled Insurance Program (OCIP) for the benefit of state agencies. These agencies include the Utah Department of Transportation (UDOT), the Division of Facilities Construction and Management (DFCM), school districts and charter schools, as well as colleges and universities. OCIPs are being used on major construction projects across the nation. Most large contractors are familiar with an OCIP or "wrap-up" concept. Under an OCIP, the owner–in this case the school district or charter school–furnishes the insurance on the construction project for the protection of the owner, project manager, general contractor and all tiers of sub-contractors. Insurance costs are identified in the bid documents and then removed with a change order when the bid is awarded. There are many advantages to using an OCIP. Broader coverage and higher limits can be obtained because of volume buying power. This provides the best coverage for all insurers at the best possible price. The OCIP also eliminates the substantial policing effort on the part of the owner and contractors to assure that numerous certificates of insurance are in place and correct.
In addition, under a fragmented insurance program, the owner cannot be assured that completed operations coverage–that is, coverage for losses that are caused by the contractor's negligence but happen after work has been completed–would still be in force. The OCIP provides for this coverage to continue for five years after project completion. (1) Insurance Provided by the Owner Subject to the insurance provisions of the construction contract, the owner secures–at its own expense–specific coverage for all contractors and subcontractors of all tiers performing work at the project site. The owner's insurance will not apply to vendors, suppliers, material dealers, truckers, or others who merely furnish property and/or transport materials, parts, or equipment to or from the project site. The OCIP does not provide insurance coverage for automobiles or contractors' equipment. The owner provides the following insurance: Workers Compensation Insurance with Utah statutory limits for contractors, including Coverage B, employers’ liability with limits of $1,000,000 each accident, $1,000,000 per disease-policy limit, and $1,000,000 per disease-each employee. $200 per claim contractor deductible applies. Each contractor will be issued an individual Workers Compensation policy; losses on projects will affect individual experience modifiers.
Commercial General Liability Insurance affording insurance for the hazards of the premises and operations (including explosion, collapse, and underground hazards), elevators, independent contractors, completed operations and products, broad form property damage (including completed operations), blanket contractual liability, and personal injury liability. Limits are $2,000,000 per occurrence and $10,000,000 aggregate. $1,000 per occurrence contractor deductible applies. Excess/Umbrella Insurance with total limits per occurrence and aggregate of $100,000,000. Railroad Protective Liability Insurance (as required) with limits of $5,000,000 per occurrence and $10,000,000 per aggregate. Builder's Risk Insurance—provided by the State for DFCM, school districts and charter schools. A $5,000 per occurrence contractor deductible applies. Architects and Engineers Professional Errors and Omission Liability Insurance with limits of $25,000,000 per claim and $50,000,000 per aggregate. $50,000 per claim deductible applies. Contractors' Pollution Liability Insurance with limits of $10,000,000 per occurrence and $10,000,000 per aggregate. $5,000 per occurrence contractor deductible applies.
(2) Insurance Provided by Contractors All contractors–including subcontractors–must at all times maintain the following insurance: Workers Compensation Insurance with Utah statutory limits for contractors, including Coverage B, employers’ liability with limits of $100,000 each accident, $500,000 per disease-policy limit and $100,000 per disease-each employee. Commercial General Liability Insurance with $2,000,000 aggregate and $1,000,000 per occurrence limits. Automobile Liability Insurance with $1,000,000 combined single limit. Aircraft Liability Insurance (if applicable) with $1,000,000 per occurrence limit. Valuable Papers and Records Insurance (if applicable).
Certificates evidencing insurance coverage must be submitted to the Utah OCIP insurance brokerage firm project administrator prior to commencing work. Please see Supplemental General Conditions and a Safety Overview for the Owner Controlled Insurance Program. The State of Utah, through the Division of Risk Management, has contracted with the following insurance brokerage firm to provide the Utah Owner Controlled Insurance Program:
Willis Insurance Brokerage of Utah, Inc. Bruce Dennis, Project Manager
The people to contact for more information regarding the Owner Controlled Insurance Program at the State Division of Risk Management are: Roger Livingston, Director (801) 538-9560; Steve Hewlett, Assistant Director (801) 538-9572
f. Addenda During the bidding period, it is natural for the bidder to have questions regarding the bid documents. Occasionally, the architect or engineer may want to change the documents to reflect the concerns addressed during the bid period. The owner or architect-engineer should never answer a question over the phone unless the answer can be found in the bid documents. All other responses should be in writing and submitted to all plan holders as part of an official addendum. Doing otherwise jeopardizes the bid process and could result in a bidder contesting the bid results. It is generally good practice to have all addenda issued from the architect. All questions during bidding should also be channeled through the architect.
g. Bid Opening In the public process, all bid openings should be conducted in open meetings. Bidders may be provided with bid tally sheets as provided by the architect. The bids should be read aloud. The receipt of addenda, the presence of the bond and securities, and any other irregularities should be noted at this time. Bids received after the date and time set aside for receipt of bids should be returned unopened to the bidder. At the end of the bid opening, it should be stated that this is what the proposals indicate and following evaluation of the bids, the low bidder will be announced.
h. Awarding the Contract The owner does not have to accept the low bid or any of the bids. However, in rejecting any of the bids, careful consideration should be given and reasons carefully outlined. Once a contractor has been selected, the owner has the right to negotiate with the contractor for changes. If major changes are necessary, the project may need to be re bid. However, this could cause major problems and should be avoided, if possible. The owner should instruct the apparent low bidder, and possibly the second low bidder, to review his/her bid for accuracy and to submit for review the subcontractors whom the contractor intends to utilize. This can generally be accomplished within 24 hours. This will also prevent the contractor from shopping around for lower subcontractor prices that will not be of benefit to the owner.
i. Bidding Process Summary The American Institute of Architects (AIA) has several documents available to assist in the bidding process and should be consulted to obtain the necessary documents. Bidding and Negotiation Document 3.91 was a primary source of information for this reference manual. This, along with AIA Documents A305 and B141 from the Architects Handbook, should be studied when preparing for the bid process. School district and charter school architects can help secure these documents. The owner's legal counsel should also be consulted, along with the owner's purchasing departments or those assigned to oversee such procedures.
j. Purchasing Specifications and Procedures A specification is a detailed description of materials, supplies, equipment, pre-cuts, or construction work that is used in the procurement process to tell prospective contractors precisely what the owner desires to purchase. A statement or scope of work is a unique type of specification generally used for the procurement of professional or management services. Federal regulations published in the Guidebook for HUD Grants Contracting [24 CFR 85.36(c)] states, in part, “All procurement transactions shall be conducted in a manner providing for full and open competition.” In compliance with this requirement, the State if Utah requires that specifications or statement of work for all construction must be designed so as not to restrict competition to one supplier. The purpose of a specification is to serve as a basis for obtaining a supply or construction item adequate and suitable for the procuring agencies' needs and the requirements of the project, in a cost-effective manner, taking into account the total costs of ownership and operation as well as initial acquisition costs. Specifications must permit maximum practicable competition consistent with this purpose. Specifications are to be drafted with the objective of clearly describing the procuring agencies' requirements (DFCM Administrative Rule R23-1-55). There are three general types of specifications used in preparing contracts for equipment, supplies, or construction – (1) functional or performance specifications, (2) design specifications, and (3) brand name or equal specifications. While these general types are described below, it is rare to find specifications that fit completely into just one of the above categories. Most specifications contain a combination of design and performance requirements and may, include brand name or equal descriptions of components. Division of Facilities Construction and Management (DFCM) Administrative Rule R23-1 “Procurement of Construction” is an excellent compliance document that school districts and charter school construction purchasing personnel should consult. (1) Functional or Performance Specifications Functional or Performance Specifications contain performance characteristics that are desired for the item or that identify how the item functions. The detailed design or exact measurements are not stated. A functional or performance specification is inherently risky. Performance specifications state the overall requirements so that each contractor may furnish its own item to meet the required performance. For example, a new boiler specification can simply call for a gas-fired hot water boiler that will produce 100,000 British Thermal Units (BTUs) per hour. It is easy to imagine a gas-fired boiler that can produce 100,000 BTUs per hour but it may also require continuous and costly maintenance. (2) Design Specifications Design Specifications contain a description of the item desired as opposed to performance standards. Design specifications may be as detailed as needed. Depending on the nature of the item, the design specifications may contain precise measurements, tolerances, materials, product tests, quality control, and other detailed information—provided competition is not being limited to one product. The information furnished in the specification should be sufficiently detailed to ensure that all items manufactured to the specifications will be virtually the same. A detailed description of kitchen cabinets, giving dimensions, fastening details, materials, and hardware, is one example of this type of specification. (3) Brand Name or Equal Specifications Under this form of specification, clear and accurate product descriptions are developed. These descriptions must not contain features that unduly restrict competition. It may be necessary to describe technical requirements for materials and equipment by referencing brand name products in order to define performance or other salient requirements. References to brand names must be followed by the words “or equal” and a description of the item’s essential characteristics so that competition is not restricted. Specific brand names may be used only for establishing design and quality standards and only if there is no other reasonable method of designating the required quality of the item desired. When brand names or catalog numbers are used, inform the offerors that such references establish only a design or quality standard; in fact, any other products that clearly and demonstrably meet the standard are also acceptable. School districts and charter schools should avoid incorporating a particular manufacturer’s specification as the project specification. This may give the appearance of restricting competition and suggest that other manufacturers’ products are at a disadvantage and may not be accepted. If the school district or charter school specifies a brand name cabinet, the essential key elements or features of the product should be stated. For example, if specifying kitchen cabinets with the key features of solid wood doors and plywood frames, then many available brands and styles of cabinets will meet the key criteria. Therefore, all of the brands should be acceptable. (4) Contractor-Developed Specifications In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors funded to develop or draft specifications, requirements, statements of work, invitations for bid, or requests for proposals must be excluded from competing in the procurement. The only exception to this rule is if, prior to the solicitation, all respondents to solicitations are provided with materials and information made available to the contractor involved in matters pertinent to the solicitation. 63-56-301 UCA specifies that rules and regulations shall be promulgated—by the state, and in this case by school districts and charter schools, which are designated as Local Public Procurement Units—to govern the preparation, maintenance, and content of specifications for supplies, services, and construction required by the Local Education Agency (LEA). These rules and regulations must determine the extent to which a nonemployee who has prepared specifications for use by the LEA may participate in any LEA procurement using such specifications. (5) Chief Procurement Officer Duties in Maintaining Specifications The school district or charter school chief procurement officer is required to prepare, issue, revise, maintain, and monitor the use of specifications for supplies, services, and construction. The chief procurement officer may enter into contracts with others to prepare construction specifications when there will not be a substantial conflict of interest. The chief procurement officer must also retain the authority to approve all specifications (63-56-302, UCA). All specifications must seek to promote overall economy and best use for the purposes intended and encourage competition in satisfying the LEA’s and state's needs, and shall not be unduly restrictive. The requirements of this part regarding the purposes and nonrestrictiveness of specifications applies to all specifications, including—but not limited to—those prepared by architects, engineers, designers, and draftsmen for public contracts (63-56-303 UCA). (6) Utah Antitrust Law The primary purpose of the antitrust laws is to protect interbrand competition. The Utah Antitrust Act—76-10-911 – 926, UCA—identifies the legislative findings and purpose of the act:
(7) Preference for Commercially Available Products Recognized, commercially-available products must be procured wherever practicable. In developing specifications, accepted commercial standards are to be used and unique products must be avoided, to the extent practicable. (8) Nonrestrictiveness Requirements All specifications must be written in such a manner as to describe the requirements to be met, without having the effect of exclusively requiring a proprietary supply or construction item, or procurement from a sole source—where a rigid standard is specified and there are no allowed substitutions due to the nature of the conditions to be met—unless no other manner of description will suffice. This may only be used when very restrictive standards are necessary and there is only one proprietary product known that will meet the rigid standards needed. In that event, a written determination must be approved by the school district or charter school chief procurement officer that it is not practicable to use a less restrictive specification. The written determination must be kept on file. (9) Procedures for Developing Specifications Specifications may designate alternate supplies or construction items where two or more design, functional, or proprietary performance criteria will satisfactorily meet school district or charter school requirements. The specification must also contain a nontechnical section to include any solicitation or contract term or condition—such as a requirement for the time and place of bid opening, time of delivery, payment, liquidated damages, and similar contract matters. (10) Use of Proprietary Specifications The school district or charter school chief procurement officer must seek to designate at least three brands as a standard reference and state that substantially equivalent products to those designated will be considered for award, with specific conditions of approval being described in the specification. Unless the chief procurement officer determines that the essential characteristics of the brand names included in the proprietary specifications are commonly known, he must include a description of the particular design, functional, or performance characteristics which are required. Where a proprietary specification is used in a solicitation, the solicitation must contain explanatory language that the use of a brand name is for the purpose of describing the standard of quality, performance, and characteristics desired and is not intended to limit or restrict competition. The school district or charter school must also solicit sources to achieve whatever degree of competition is practicable. If only one source can supply the requirement, the procurement shall be made in accordance with DFCM Administrative Rule R23-1 “Procurement of Construction”, Section 25 “Sole Source Procurement” R23-1-25 . R23-1-25 Sole Source Procurement. (1) Conditions for Use of Sole Source Procurement. The procedures concerning sole source procurement in this Section may be used if, in the discretion of the Director, a requirement is reasonably available only from a single source. Examples of circumstances which could also necessitate sole source procurement are: (a) where the compatibility of product design, equipment, accessories, or replacement parts is the paramount consideration; (b) where a sole supplier's item is needed for trial use or testing; (c) procurement of public utility services; (d) when it is a condition of a donation that will fund the full cost of the supply, material, equipment, service, or construction item. (2) Written Determination. The determination as to whether a procurement shall be made as a sole source shall be made by the Director in writing and may cover more than one procurement. In cases of reasonable doubt, competition shall be solicited. (3) Negotiation in Sole Source Procurement. The Director shall negotiate with the sole source vendor for considerations of price, delivery, and other terms. (11) Rules Regarding Use of Functional or Performance Descriptions Specifications shall, to the extent practicable, emphasize functional or performance criteria while limiting design or other detailed physical descriptions to those necessary to meet the needs of the school district or charter school. To facilitate the use of the criteria, LEAs must include as a part of their purchase requisitions the principal functional or performance needs to be met. It is recognized, however, that the preference for use of functional or performance specifications is primarily applicable to the procurement of supplies and services. This preference is often not practicable in construction, apart from the procurement of supply-type items for a construction project. (12) Rules Regarding Brand Name or Equivalent Brand name or equal specifications may be used when the procurement officer determines that a specification is in the school district’s or charter school’s best interest. Brand name or equal specifications must seek to designate as many different brands as are practicable as "or equal" references and shall state that products substantially equivalent to those designated will be considered for award. Unless the procurement officer authorized to finally approve specifications determines that the essential characteristics of the brand names included in the specifications are commonly known in the industry or trade, brand name or equal specifications must include a description of the particular design and functional or performance characteristics which are required. Where a brand name or equal specification is used in a solicitation, the solicitation must contain explanatory language that the use of a brand name is for the purpose of designating the standard of quality, performance, and characteristics desired and is not intended to limit or restrict competition. Since use of a brand name specification is restrictive, a specification may be used when the procurement officer or designee makes a written determination. The determination may be in any form deemed acceptable to the chief procurement officer, as a purchase evaluation, or a statement of single source justification. The written statement must state specific reasons for use of the brand name specification. The procurement officer must also seek to identify sources from which the designated brand name item or items can be obtained and must solicit sources to achieve whatever degree of competition is practicable. If only one source can supply the requirement, the procurement shall be made under Section 63-56-410 of the Utah Procurement Code. 63-56-410. Circumstances justifying award of contract without competition. A contract may be awarded for a supply, service, or construction item without competition when, under rules and regulations, the chief procurement officer, the head of a purchasing agency, or a designee of either officer above the level of procurement officer determines in writing that: (1) there is only one source for the required supply, service, or construction item; or (2) the award to a specific supplier, service provider, or contractor is a condition of a donation that will fund the full cost of the supply, service, or construction item. (13) Conditions for Use of Sole Source Procurement Sole source procurement may be used only if a requirement is reasonably available from a single supplier. A requirement for a particular proprietary item does not justify a sole source procurement if there is more than one potential bidder or offeror for that item. Examples of circumstances which could necessitate sole source procurement are:
The determination as to whether procurement may be made as a sole source must be made by the school district or charter school chief procurement officer. Each request must be submitted in writing. The officer may specify the application of the determination and its duration. In cases of reasonable doubt, competition should be solicited. Any request that a procurement be restricted to one potential contractor must be accompanied by an explanation as to why no other will be suitable or acceptable to meet the need. The procurement officer must conduct negotiations, as appropriate, as to price, delivery, and terms. (14) Facilities Construction Emergency Procurement 63-56-411 UCA provides instructions for emergency construction procurement. This section of the Code states in part, “…when there exists a threat to public health, welfare, or safety under emergency conditions as defined in rules and regulations, the chief procurement officer, the head of a purchasing agency, or a designee of either officer may make or authorize others to make emergency procurements; provided that emergency procurements shall be made with as much competition as practicable under the circumstances. A written determination of the basis for the emergency and for the selection of the particular contractor shall be included in the contract file.” (15) Sole Source and Emergency Procurement Records of Contracts Retention Section 63-56-421 UCA, “Records of Contracts Made”, requires the chief procurement officer to maintain a record listing all contracts made under Section 63-56-410 [Sole Source Contract without Competition] or 63-56-411 [Emergency Procurement] and must maintain the record in accordance with Title 63, Chapter 2, Government Records Access and Management Act (GRAMA). The record must contain each contractor's name, the amount and type of each contract, and a listing of the supplies, services, or construction procured under each contract. It is recommended the records be retained for six years and then destroyed. (16) Documents and Documentation It is extremely important to document your procurement determinations. In many cases documentation and archival retaining standards are required by statutes or administrative rules. Most procurement conflicts involve a lack of documentation. Utah State Archives suggests the following retention schedule for school district and charter school purchasing records (see Schedule 7, Purchasing Records, page 54 to 60, Utah School Districts General Retention Schedule): Here is the Utah State Archives web site. Many documents and forms are available on the Utah State Division of Purchasing and General Services web site under “Buyer Information”: The Division of Facilities Construction and Management (DFCM) web site (http://dfcm.state.ut.us) also has many construction agreement standard documents such as architect, engineer, contractor agreements, etc: Go to “Reports and Documents” then to “Standard Documents”. (17) Request for Proposal (RFP) Procurement Selections The State Division of Purchasing has developed excellent guidance in the form of a request for proposal manual and template that is most helpful to school districts and charter schools—as Local Public Procurement Units—as they develop RFPs. Here is the link to the Division of Purchasing Policies/rules where you can select the Request for Proposal (RFP) Manual. (18) Cost Plus a Percentage of Cost Procurement Prohibited Cost plus a percentage procurement is prohibited in Utah (63-56-416 UCA). A cost-reimbursement contract may be used only when a determination is made in writing by the chief procurement officer that such contract is likely to be less costly to the school district or charter school than any other type or that it is impracticable to obtain the supplies, services, or construction required except under such a contract. (19) Felony to Accept Emolument It is illegal for any person working in a public capacity—whether for a state agency or a Local Public Procurement Unit like a school district or charter school—to ask for or accept compensation for their procurement process or decisions—see 63-56-1001 UCA “Felony to accept emolument”: “Any person acting as a procurement officer for the state of Utah or any subdivision thereof, or who in any official capacity participates in the procurement of any supplies, services, construction, real property, or insurance for any such political units, is guilty of a felony if the person asks, receives, or offers to receive any emolument, gratuity, contribution, loan, or reward, or any promise thereof, either for the person's own use or the use or benefit of any other person or organization from any person interested in the sale of such supplies, services, construction, real property, or insurance.” It is also illegal for any person to offer compensation—see 63-56-1002 UCA “Felony to accept emolument”: “A person who is interested in any way in the sale of any supplies, services, construction, real property, or insurance to the state of Utah or any political subdivision thereof, is guilty of a felony if the person gives or offers to give any emolument, gratuity, contribution, loan or reward, or any promise thereof to any person acting as a procurement officer, or who in any official capacity participates in the procurement of such supplies, services, construction, real property, or insurance, whether it is given for his own use or for the use or benefit of any other person or organization.”
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