Travis County Commissioners Court
November 21, 2006
Item 2
2. Consider and take appropriate action on policy to release county estimated. Project construction price range on county public work projects in excess. Of $25,000.
>> good morning, judge, Commissioner, sifd grimes, Travis County purchasing agent. Cyd grimes. With me is marvin
>> [indiscernible] assistant purchasing agent over at construction. This issue has been discussed over the last couple of years actually. I believe it was about six months ago we discussed a little bit in Commissioners court and the judge at that time said that we needed to put it as a separate item and bring it back for discussion. What we are asking for today is for us to start publicizing a range of estimated project costs for any construction project over $25,000. As you know our h.u.d. Program has been very helpful with firms giving business. However, one of the things that we continue to struggle with is bongd. Bonding, one of the things that the minority firms have asked us that they need this type of information before they start investing in submitting a bid to us to -- so they will know whether they even have the ability to -- to bond a project and get bonding. And it's a little coincidental that we also have an item on the agenda today where we have -- we are having to -- to terminate a contract that we had awarded because a minority firm could not get bonding. And my office worked extensively to try to help them get that bonding. But back to item 2 is we would like to start publishing a range, we can get that range from -- from the departments, tnr, facilities management, sheriff's office, or -- and we can work in conjunction with the p.b.o. To get that estimate. But we think that it's fairly to the he were -- fair to the vendors to provide this information. It helps them, even the largest firm, to see if they are even interested in participating. We also have done research, marvin has gone to several websites and gotten information of other public entity, governments tall entities. Just about everyone that we have researched does publish a range. I'm not sure about capital metro. We were looking at the fine print. But the city of Austin, harris county, u.t., school districts, all of these entities publish a range for a construction budget. So we need your support and help to make this happen.
>> did -- let me ask this question. Where are we -- I know we are looking at a range and-- making sure that we can get a lot more participation. Especially h.u.b.es. You brought up another point earlier on how -- anyway, we will go into that later. But I'm trying to get a grasp, I know we -- we are doing I guess piecemeal the best we can to try to get to where we really are trying to go here. That's -- in my opinion to open up and I think the whole court has agreed to open up more opportunities for -- for diverse persons that we have in the community. I'm still trying to tie in I guess where we are with this range, how -- would it infiltrate, would it be a part of what we have hired the person that we have hired as far as
>> [indiscernible] things that they are going to be coming back. Is this all a part of that process that we are looking to increase the opportunities for hubs.
>> well, I believe if colette were here to answer that question for you Commissioner she would say yes that the more information that you can give the minority firms that the better job that they can do of -- of anticipating whether they can do a job. One of the things that you don't want to do is what we -- what we did on this other contract is have someone enter into a contract with us and then find out that they can't get their bonding. And so I -- I think colette would say, yes, that this would be helpful to the minority firms, even the larger firms to ensure that this is something that they can financially handle and not get into a -- a bind. So I would say yes.
>> okay.
>> do we not have the -- the I guess we have the ability, why wouldn't we have something in place before we award something that we are secure in -- in the ability of that -- of that contractor to -- to bond? I mean, that -- that's not -- I just sort of assumed that that would have been part of our -- why good give it to somebody -- why give it to somebody when you know they may not be able to comply.
>> what the law require, Commissioner, it says that you have to require on certain projects payment bonds and performance bonds, depending on the dollar value. Anything -- anything over 25,000 has to have a payment bond. Most contractors understand that and can get that. The law also requires performance bonds for anything over $100,000. So if they don't know going in -- and they should know. I think that your point -- they should know what their bonding capacity is, but they might not know how much this project would actually cost until they start doing the work, getting into estimating and all of those complicated details of what it's actually going to cost you. So it gives them a thumb scale look at, yes, I can get a million bonding. No, I can't get one and a half million dollar bonding. So I think that it gives them a quick look at whether they are going to have that ability and then whether it is even worth their time to go into that.
>> my question is, why don't we have something in place where we are insured --
>> the law allows them 10 days to get their insurance and bonding into us after award. What we do have in place to protect us is what we call a bid bond. And what they have to do is put up 5% of the -- of the total costs. In the situation we have after this one, you have a bid bond in an amount of about $9,000, almost $10,000, which the -- which the bidder is telling us, if I get this contract, I will be able to do the work. Get the bonding. He got himself in trouble in this particular situation and now you -- it's going to be your discretion whether you hold that honey to cover those costs -- that money to cover those costs. That is our insurance, every once in a while, I believe in the time that I have been here, we've had this situation where we've had to either -- y'all had to made a decision whether you were going to keep someone's bid bond because they could not fulfill it. I think that's happened about three or four times in the 13 years that I have been here.
>> I'm not interested -- I'm especially not interested in keeping somebody's money when -- when you know they can't even get bonded to do the job for us. So the -- the question maybe it's a legal question. Is there something that would prohibit us from having a policy, county-wise, to make sure that before we say you are the one, that gets this bid, that we know that you can be bonded for this? Is there something that --
>> it's difficult. It's kind of like getting a credit check before you buy a large item, a car or a house or something like that. It's similar to what these -- what these contractors are doing. They think they can make the bonding and so they go ahead and bid on a project and a lot of -- frankly a lot of the smaller hubs and things, they have been doing business with private companies, this may be the first county job they bid on. They may not realize that they have to post a bond in some situations. So if you would -- if you were to do what you were suggesting, to make sure that they have the bonding capacity, it means that you are purchase -- that your proching office is pretty well going to have a run -- purchasing office is going to have to run a credit check on them. That's why the bid specs and documents say right now that a contractor has 10 days, once they know that they have the award a contract to go get their bonds. Frankly that's why the legislature put in the bid bonds process in there, I think that's why they put it in there. So that Commissioners court would have the incentive, provide the incentive for a contractor to go ahead and do your home work ahead of time, make sure that you can get your bonding, your payment and your performance bonds or you could potentially lose your bid bond. It's a --
>> also there's a situation that we presume these folks have not been on any other contract for any other entity and they may have multiple things out there with the hope that they get one, two, three however many and depending on how many they get, that might also bump up against whatever their limit is. So they have to kind of -- pick and choose. So we have to also think in terms of where they are. They have already committed a lot of money just to get into the big process here. This is a rarity. I mean, I can't remember very many in the 12 years that I have been here and it's not for lack of trying. Not only on their own, but in conjunction with purchasing to try to get these folks bonded. And even the mentor protege process was not able to get these folks bonded in conjunction with their partnership.
>> well, judge, I realize this may be a different subject. I mean, I think that what we are being asked to do makes all of the sense in the world. So I would move approval of that. We may get into further discussion about how we --
>> joe, roger, any opposing viewpoint that we ought to hear?
>> this is not opposing, I'm not sure that the logic is following here. If a minority contractor actually prepared a bid and submitted it, he knew at that time how much he could or could not get bonded for. Whether or not we publish our range prior to that, I'm not sure that I get the point. At this point, at the point that he submits the bid, he knows whether or not he should be able to get bonding. The fact that we give him a range prior to that, what difference does it make? I mean if he went through the bidding process, at the end of that bidding process, has he priced the project. He should know whether or not he could get bonded before he submits the bid. Publishing the range may get him a preview, but I don't think it will necessarily prevent a contractor from submitting a bid and finding out subsequently that he doesn't have bonding capability. Because they are doing it on a -- on a competitive process. They don't know whether they will get the bid or not. They are hoping they will. If they get it they will resolve the bonding. At that point they may find out they have a different problem.
>> this is a different subject than that. I think what we are being asked, I have always wondered why didn't we at least put something out there, here is kind of what we think the budget is. I think there are plenty of people that look at something and go I don't know whether I can get right with that thing or not, especially in today's market. To me, what this is doing is ensuring somebody that okay here is kind of what the county thinks they have to spend on a project. Before we go and spend lots of dollars on preparing and putting something together, that's -- so I'm -- I'm still focused in on why it is that we are -- we need to be doing this. The whole bonding, other bonding issue is a different subject matter as far as I'm concerned. But I want this -- I think that this makes sense to do because it tells a lot of folks out there in the industry that okay, here's something that yeah I kind of know enough about this to know whether or not I want to go after the business or not.
>> the problem is if they are not doing their home work, they will take that bid and submit it without very little work. If the county will spay me 10% more than the estimate, sure I'll do the work. There's no competitive pricing going on among your competitors. By not revealing your budget or even a range, what you are asking the contractors to do is take a look at the project and actually get in there and competitively price it so that we know what the real market for this is. As opposed to the estimate. That he is of value to the county. Because from that we get low bids. And so by -- by publishing a range, you may in fact do what you are proposing to do. Preview for contractors, whether it's within a certain competitive area for them. If it's in their business range. But we still hope in the end that we will have whoever is in that pool is truly competing for the project. Not just tagging it with a percentage and submitting it.
>> well, I understand that, joe. I think that
>> [indiscernible] folks are not going to -- unless they are just okay well here let's throw this thing out, if we can get it with 10%, fine. At some point in time they are going to have to sit down with us and justify what they have got.
>> they have very line item intensive. We have a line item for every little thing. That's where you start looking at whether you are competitive or not.
>> so $25,000 to one thousand dollars is the range -- to $100,000 is the range.
>> no. We are just asking for any of our projects that we have to formally go out and bid that we advertise a range.
>> whatever range that is, all right.
>> whatever we decide among the departments. That that range should be.
>> bought you brought up a point earlier where you said $25,000 up to $100,000 as far as what's required for what? And I remember that you mentioned $100,000. So I was trying to see what -- what range you are talking about as far as the minimum.
>> $25,000.
>> $25,000 is the miles an hour.
>> we have to formally solicit.
>> anything over $25,000 --
>> anything over $25,000.
>> okay. We are asking to publish the range.
>> all right. I investigation my second points, though -- I guess my second point, though, there is some -- a contingency I guess as far as the bid payment, in other words having to set the bid. What range would that be as far as the amount of money? In other words you have a small business out here that want to do some business with the county ourselves, $25,000, you have got to look at these requirements, all of the other requirements as far as bonding is concerned.
>> 20 by law Commissioner. Any bids over 25,000 or contracts over 25,000 requirement a payment bond. Over 100,000 you are required to provide a performance bond.
>> performance bond, okay.
>> that's where you hit the $25,000 range from.
>> right. Okay, I was looking at that as far as this range, as far as the break off, as far as the performance bond, the payment bond. That's what I was alluding to in that particular scenario. However, I'm concerned because of the fact that we have other governmental entities doing the same similar thing, don't we?
>> yes, sir.
>> say what kind of report if we had any -- any upheavals or --
>> oh, yes
>> [multiple voices] we get this question almost every time you put a project out. That's why I'm here before you. I mean some of this information is public information and the really savvy contractors can find it. And, you know, we are -- we need to be doing a better job cost estimating our projects anyway. So if we get better at that, we should publish a range, whatever, if we have a million dollar project, some range under that. You know, we don't have over a million dollars, we shouldn't say we have over a million dollars.
>> the first phone calls my staff receives when we put out a bid, the first question is what's the budget, what's the estimate? My staff tells them we are not privy to that. We direct them over to the department to the project managers.
>> you know it's an ongoing question, an ongoing -- sore point with the contractors.
>> other governmental entities are doing similar as far as -- as far as that range, if they are doing similar things, I mean, what -- what -- enhancing their participations? Negatives against it. I don't really know. It appears if they have -- it has been working for them, I don't see why tarrant county is not doing it.
>> I have a document here, Commissioner, bid briefs, published by business resources consultants
>> [indiscernible] for the city of Austin. All of the local governmental agencies provide information to ms. Hadnot to publish in the bid brief, city of Austin capital metro, Travis County, university of Texas, aisd. We are the only agency that doesn't in this brief -- I'm sorry, capital metro had one project without. But Travis County, capital metro are the only agencies that don't have a range or a project estimate listed on these public work projects in this bid brief. This goes out to the bidding community.
>> well, I second Commissioner Daugherty's motion, but I
>> [indiscernible] support this.
>> thank you.
>> I'm really glad that you mentioned that a lot of this is public information. Anybody has gone through the brain damage of watching us during the budget process and anything that we have related to facilities and t.n.r. We have killed a lot of trees coming up with a lot of spread sheets that specifically talk about how much money we are appropriating in our budgets for certain kinds of things knowing that we want roger to kind of keep things within a certain range that we are setting what those budgets are. Certainly anything that is a bond project, those have been discussed widely in the community and we have put certain kinds of numbers out there related to -- to a specific project having a specific budget. Knowing that there is a wide range of what might go towards utilities for the organization versus right-of-way. It's all fluid. But people do have some kind of a -- kind of a range and I think that's all that we're talking about here. I have seen way too many things that have appeared on our item, on our -- on our agenda where we have had to throw out every single bid because -- because there was no reality between what we thought it was going to be and the budget that was established and what everybody wound up coming in. They didn't take our number and add 10%. They basically said we believe the market is someplace else and it is expensive to have to redo these things over and over and over and over again. To me, I see this as a collaborative process and not an adversarial process.
>> now, we will get to you in just a moment here, joe. If we were listing the pros of the -- of the advantages of releasing a price range, what would they be? Number one advantage would be?
>> the contractor can -- can look -- just briefly look at the advertisements and tell whether they would be able to get bonded on this project.
>> okay. So -- so the contractors can be more involved.
>> more involved.
>> makes sense.
>> and number two? Informed about the budget and bid bond accessibility?
>> makes sense.
>> right.
>> what's second? Second advantage?
>> it would -- it would avoid us giving phone calls on every construction project and having to go through and -- and tell them we don't have that information. And getting in those discussions with the contractors, why don't you -- you know, then having -- having disagreements at prebid conferences between staff.
>> [one moment please for change in captioners]
>> > and without any prior numbers that might lead them to believe that that was what the market was. The cip budget when prepared have a substantial contingency included. So if that have that number to start with, it doesn't encourage them to start any lower. They know what's in our budget. You will get higher prices.
>> I don't think we should include the contingency in it. I think we should give a range that does not include contingencies. That should be for things that our estimators didn't catch.
>> so in the price that we release we will not include the contingency.
>> and I would include a higher range. Basically what you want to do, from what I understand about the goal here, is to get contractors within a category of what they're typically bidding on. Your categories could be quarter of a million, half a million,-million-dollar projects, five-million-dollar projects. If not, say this project is worse this much, I don't think a two to five percent will necessarily sway a developer one way or the other. If he knows he can build a five hundred thousand dollar project, he will. Whether it's a two to five percent variance. So I think what you're trying to do is categorize your capital projects to the type of projects a contractor normally goes after. The big guys will go after txdot contracts, they won't even come to the county. They're after the 100-million-dollar range. So we're really talking about contractors that are used to doing business in perhaps the half-million-dollar range or quarter of a-million-dollar range for subcontractors.
>> even on this big design-build project at the diswrail, the -- the jail, the contractors were asking what the budget was. They were saying they were going to spend $95,000 to do the proposal to us. That's a whole -- they were going to spend $35,000 to do the proposal for us.
>> I have two cons. Is there a third con. The --
>> [ laughter ]
>> good morning. I really support 100% what joe told you today regarding the issues about the publishing construction estimate range. I would like to add a little bit more about -- give you a little scenario --
>> can I finish my exercise first? I'm really trying to get pros and cons so I can think about how to vote in just a minute. Any other cons. Joe believes if we give the price range, then it would not reflect the true market. And second, he thinks if the contingency is in there, the price range will be inflated, which I guess he can address by taking the contingency out. Is there a thid disadvantage or con?
>> yes.
>> what is it?
>> the third one is we lose the competition, possibility of losing competition. I tell you how -- if you have a project let's say about one-million-dollar and then the contractor start working on his bid, and when he got like to a certain point and he cross a threshold of a million dlarksz he will stop and not continue the bid and he will not submit bid. Sorrel the competition, we're clues -- so really the competition, we're looks the competition. So we want more bids on a project. That's fine if it comes a little bit above the construction budget because the contractor in his mind, that -- with the public sector in his mind, with his budget if he exceed that the county's going to reject, but he doesn't know that we have other source of funding from saving from other projects, from a contingency, from other source of funds. We can come to the the court and say here's some supplemental funds, let's go ahead and award the project because if you get like six bidders on the project and all of them were then to rank close to each other, then the bid is there within those six bidders. And then if you are short, say about 100,000 or so, we can amend that by some other funds so we can award the project. So I think this is a third con on this one, we might lose competition on that. So we have to differentiate also in the facility management department and tnr. The way we receive bids is different. Tnr received bids just like txdot, as a unit bid price. Say if I do a part, I have about 100 unit bid item, and they have a unit price established. At the end we sum that number and we know what that number is. We don't have the -- in facility management don't have the luxuries to get all those numbers, all get is only one number from the contractor. We don't know what's in there until we award the bid or we have a preaward bid so we have a scheduled value to see where that number come from. I would like to see more minority involved in the construction industry, but can we cap that at more than 25,000 to a 200,000, because if purchasing power getting minority, that's what they're going to bid, they're not going to get five-million-dollar project or two-million-dollar project. I don't know. Probably we should think more about that before we put the ceiling on that rather than to have it open on --
>> so you would have a minimum plus a maximum.
>> yes.
>> you would say between 20 and 25,000.
>> we have to have participation and twoaf establish a limit right there because also the folks that don't have -- if the bond involved right here, they need to know what the bond is so they can go ahead. That's what the purchasing perspective on that. On my case I don't want to lose competition. I would like to have more numbers, more people coming to the table with their number. We're not a-- we're doing our best to get closer to what the market is, but there are -- they are the experts sometimes and if they are the experts, then they bring to the table lots of numbers. And we compare ours. And if it's within our numbers, that's fine. If not, we can look at some other source of funz to move the project forward or we can do some kind of a value engineer or cost cutting. But again, this is my thought to the disadvantages we have.
>> is there a fourth disadvantage? Just those three? Are we certain that our budget usually reflects market?
>> not necessarily at the beginning. And the management, we got a number -- we have a project we need to move forward. And we just put the number based on our previous projects. And then after we start designing the project and the schematic design and design development, we refine that number. At the time we'll see yes or no, if it's reflected in the market because whand to us in the last two years, the market went ba lace tick on -- ballistic on the costs. The costs on estimating are not valid anymore. So we have to start again the last two years with the cost estimation to make sure that we are matching the market or we have somewhere around -- around the number that the contractor is going to give us. But we're not there yet, but again, we're doing the best we can to be as close as possible within 10 percent of -- within 10 percent of the construction estimate that we think of because in the industry standard, if you are -- when you are in the -- when you release the project for bid and have you a cost estimate, you know that it is -- the low bidder is supposed to come between five or 10% plus or minus of your estimate. That's the industry standard. That's what it needs to be all the time. Have you a cross-section budget and you put it for bid and it should come plus or minus five to 10 percent. If it went beyond that, that's ailtion bit different.
>> -- a little bit different.
>> if we release the range say over the next 12 months, will we be able to impact the value of it 12 months from now?
>> there are thing we can evaluate. There are some things we could look at.
>> morning, judge, Commissioner. I just wanted to give you a little bit more information about this because I've done it both ways. When I was up in ohio we put the actual engineer's estimate out for bids. All the contractors knew what number that we were expecting the bids to come in at. And it did provide a level playing field, to Commissioner Sonleitner's point, that savvy contractors can find this information. And also what you guys may not know is during the preparation of our plans and specifications for our projects, and even our estimates, my staff are comung with contractors to try to get a handle on whether or not the numbers that they are thinking things should cost is realistic. So there's communication going back and forth during the development of our plans, not all contractors are involved in that process. We tend to select the ones that we've done business with in the past, we have a working relationship with and we talk to them about that. We do -- when I was in ohio we did bid them as lump some or as unit price, so it didn't seem to matter. The pros were that I felt like it was a level playing field for all the bidders, and it also helped us to understand whether or not we were going to get a good bid because halfway through a bidding process the contractors will start calling up and saying you're estimating this as two million dollars. We're not coming anywhere near that. And we start getting calls from these guys and we go back and look at these numbers, we ask the consultants to look at nem, we were able to salvage the bidding process for several projects in that manner. So we didn't have to open bids to determine we're nowhere near it, we have to go through the whole process again. That gave us another advantage. On the con side to joe's point, I did see situations where some bidders would take the number, add 10 percent and submit it. They would be the ones sitting out in the parking lot at the last minute before they sent a bid throwing numbers together and they figure if they dmaim low they'll deal with it through the claims process. They'll try to nickel and dime us for claim. That I didn't like. The other thing was on the bond capacity issue, it's not just the capacity -- it's not known what their capacity is, it's the amount of effort any firm has to put into preparing a good estimate. These are the guys just adding 10%. It takes dozens of hours to put together an estimate. In ohio they had to buy the plans, several hundred dollars right there, and then invest a lot of time in coming up with an estimate and then finding out, I'm beyond my capacity. And that's not just the small firms. Larger firms have bonding capacity as well. They may not be running right on the ragged edge of what their capacity is and they want to get the maximum out of it, so they'll want to know where they are relative to their capacity as well.
>> so in conclusion --
>> [ laughter ] -- is your recommendation that the price range releasing make sense or that it's better not to release the price range?
>> I think that if we wanted to try to evaluate this as a trial for the county, a price range is probably the better way to go rather than putting an exact number out there. Let's see how that wokz and -- work and that will help solve some of the problems.
>> that's all I was after to begin with. I don't know -- I wouldn't care if we say we don't think that -- we think that the bottom number is this, from best that we can guess. We don't know what you're goik to come in at. I'm seeing too many things come in where we have one or two or none or we have three, all of a sudden we go down to two, and I think that some of that is because there are people -- the sophisticated people can do it, but let's just somehow put something out there where people go -- I see what they at least think that it is because I realize that in the last couple of year, my gosh, they have been all over the board like roger has said. But we are kind of getting a handle now in the last year. We've really understood what kind of a market we're in. And it doesn't take that long to figure out what kind of a market we're in, but I do think we need to have that range which sends a clear message to people about I'm interested in looking at this job or I'm not.
>> I would like to add that --
>> that point that you brought up, that I think is strategic, in addition to this, especially because we do have such a diverse community as far as doing business with Travis County, of course we would also give the hubs an opportunity to do business with Travis County. My concern is that in the bonding capacity aspect whereby it would be over the 25,000-dollar range as far as what's required for that type of bond, I guess the payment bond, then over the 100,000-dollar mark for performance bond, is that also shown when the process gets started?
>> yes, sir.
>> this is what you've got to have?
>> yes.
>> this is your bonding capacity? $100,000 require a performance bond?
>> right. Those two clauses, the bid bond, pance bond are all standard clauses in our instruction to our bidders. So they know from looking at it if it's over 25,000 they will have certain bonds. So yes, they understand that.
>> it's required.
>> Commissioner Daugherty's motion is to release the county estimated project construction price range.
>> I just wanted to add one thing, judge.
>> hold on.
>> can I go ahead?
>> on construction projects. Is it friend throi exclude -- friendly to exclude the con tint jent si.
>> absolutely.
>> can we do this after 12 months.
>> certainly.
>> so does yours cover that plus the friendlies.
>> yes.
>> cyd?
>> I guess it's going on six years, some of the new design-build legislation, alternative construction methods, in the competitive sealed proposal language in the law, it requires us to give estimated budgets. So the ae community is moving more and more towards getting this information. So I appreciate y'all's support on this.
>> any more discussion of the motion?
>> all in favor? Thatpasses by unanimous vote.
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Last Modified:
Wednesday, November 22, 2006 10:29 AM