Minutes

Cary Town Council Subcommittee to Review the Town’s Bid Award Process

February 15, 2007

Subcommittee Members Present: Council Members Marla Dorrel and Nels Roseland

Subcommittee Members Absent: Council Member Julie Robison

The meeting agenda follows:

1. Statutory requirements for processing architectural, engineering and surveying services - Fleming Bell, UNC-CH School of Government

2. Cary's policy, procedures and goals - Bill Coleman, Town Manager

The meeting began at 1:15 p.m. (the public notice gave a start time of noon, or after the Planning and Development Committee meeting, whichever time was later).

Mr. Coleman outlined the purpose of the meeting: (1) to share the state law on this subject; (2) to share the Town’s policies and procedures and how they relate to the law and the advantages and disadvantages as a result of the Town’s current practices; and (3) to discuss what the architectural and engineering professionals want us to do, and those pros and cons.

Mr. Fleming Bell of the School of Government gave an overview of the state law (GS 143-64.31 and GS 143-64.32). He stated there is a federal statute known as the Miller Act that deals with selecting people for design services on public projects based on qualifications. He stated in 1987 NC adopted a version of that law but with significant modifications based on negotiations with the design community and the local government community. He stated the design community wanted a statement that the local government is to use a qualification based system for choosing designers, and the local government wanted to be able to use other systems if they so chose. He stated the statute contains two statements that are somewhat contradictory:

(1) use a qualification based system which does not rely on price except for unit cost, pick the designer and then negotiate the price; if negotiating is not successful, then go to the next best qualified firm; and

(2) units of local government or the NC Department of Transportation may, in writing, exempt particular projects from the provisions of this article: (a) in the case of proposed projects where the fee is less than $30,000 or (b) other particular projects exempted in the sole discretion of the unit of local government, stating the reasons therefor and the circumstances attendant thereto.

Mr. Bell stated a local government may exempt one or several projects over time from the requirements of this statute, and if the municipality exempts the project, then they are free to use traditional competitive bidding, negotiation or some other procedure.

Mr. Bell stated if the fee is $30,000 or more, then the local government must adopt an individual exemption for the project and must state reasons and circumstances, which can be anything that is legal. He stated no reason is necessary for projects if the fee is less than $30,000. He stated the statute is not clear if individual exemptions are required vs. blanket exemptions for projects under $30,000. He stated that licensing boards for some design professionals tell their members that exemptions on a project-by-project basis are always required, even if the fee is under $30,000.

Mr. Bell stated the statute states that the unit of local government may exempt the project. It does not specify that the governing board must grant this exemption. He stated the Cary council has adopted a policy that gives staff this authority for projects under $30,000. He stated it is important that the town attorney is comfortable with this policy.

Mr. Bell summarized that it is completely legal in NC to choose whether to follow the qualification based system and to choose whether to follow it on all or only some projects. He stated if the local government exempts itself, then they have the freedom to choose their system. He understands that Cary has a system that is qualification based but adds in the price as a factor. He stated Winston Salem asks for qualifications and price; they look at qualifications first without revealing the price, and then they open the price estimates.

Ms. Dorrel asked what the legal structure actually provides. Mr. Bell stated it provides a guideline that is a state and local government policy in NC as a preferred method while also leaving discretion with local governments, the NCDOT and some of the university system about whether to follow it.

Mr. Coleman outlined the purchasing portion of the Town’s finance policy. He stated council adopts policy and staff develops procedures to provide day-to-day detail to the implement that policy.

The excerpt from the finance policy follows:

VI.  Purchasing and Contracting Policy

A.   A preaudit certificate, signed by the Finance Director or Deputy Finance Officer, will appear on any contract, agreement, or purchase order before it becomes an obligation of the Town, in accordance with G.S. 159-28(a).

B.   All purchasing will be in accordance with general statutes.  The purchasing process will be a hybrid system of responsibility shared by the requesting department and the Finance Department.

C.   No officer or employee of the Town who is charged with:

            1) preparing plans, specifications, or estimates for public contracts

            2) awarding or administering contracts

            3) inspecting or supervising construction

will receive a gift or favor from any contractor, subcontractor, or supplier who

            1) has a contract with the Town

            2) has performed under such a contract within the past year

            3) anticipates bidding on such a contract in the future.

Furthermore, the Town will not directly, nor indirectly, enter into a contract for the provision of goods and/or services with any employee(s) of the Town or any businesses in which a Town employee has greater than a ten percent ownership.  If any such contract is entered into, it shall be canceled upon discovery and the delivery of goods and/or services thereunder shall no longer be accepted.  Any Town employee(s) who knowingly enter into such a contract with the Town shall be subject to disciplinary action as provided for by Town ordinances and/or policies.

D.   The Town will participate in a program that allows for the opportunity to purchase under state contracts and in cooperative agreements with other governmental units.

E.   Encumbrances will be recorded as obligations arise for budgetary control.

F.   The Town’s cost estimates for construction and repair and procurement of goods and services will be confidential prior to bidding and are subject to all of the provisions contained in G.S. 133-33.

G.   Surplus property will be disposed of in accordance with State Statute.  The Purchasing Agent may declare surplus any item of excess personal property reported to him or her in writing by a department head when both the Purchasing Agent and the department head estimate its value to be less than the amount specified in G.S. 160A-266.  Before final disposition is made, the Purchasing Agent will notify the Town Manager and other departments of the availability of any excess items considered fit for possible re-utilization.  The Purchasing Agent will dispose of the property so as to secure a fair value for the Town and to accomplish the disposal efficiently and economically.  Accordingly:

1.  Public notices of such disposition are not required.

2.  The Purchasing Agent may set the value of each item, and convey title to the property.

3.  Disposals may be made by public and private sales and exchanges.

4.  The Purchasing Agent will submit to the Town Council any reports required by state statute.

H.         Expenditures of capital outlay funds for the purchase of budget approved equipment, furniture and vehicles will be approved by Finance staff.  Expenditures of capital outlay funds for equipment, furniture and vehicles not included in the budget process must be approved by the Town Manager or Assistant Town Manager.

I.          The Town considers a process of open competition in the selection of architectural, engineering and surveying services to be in the best  interest of the Town.  As authorized by G.S. 143-64.32, all architectural, engineering, and surveying services contracts of the Town will be competitively bid.  The award of these contracts will be made on the basis of demonstrated competence and qualification of the firm making the proposal and the fee proposed to provide the service required.  The Town exempts all projects where an estimated  professional fee is less than $30,000 from the provisions of G.S. 143-64.31 which states that such services should be negotiated with the best qualified firm.  For each project where the estimated professional fee is equal to or greater than $30,000 the Town Manager will consider making the exemption from G.S. 143-64.31 stating the reasons and circumstances for the exemption.

J.          Contracts authorized by Council, either through direct award or budget authorization may be executed by the Town Manager.  Subsequent orders changing the original contract which do not exceed the approved cost of the contract will be executed by the Town Manager or the Assistant Town Manager.

K.         The Town will make a good faith effort to solicit minority business participation in accordance with G.S. 143-128.  The Town’s adopted minority participation goal for building construction or repair projects in the formal and informal range, and in the selection of architects, engineers, surveyors, and construction management at risk service providers is ten percent (10%).

L.         Inventory will be maintained at a level which ensures that essential items are immediately available and that non-essential items are available immediately or within a timely basis. Inventories and supplies will be maintained at minimally appropriate levels for operations to increase cash availability for investment purposes. Inventory levels will be audited through physical counts at least once per year.

Standard procedure to implement council’s policy follows:

Standard Procedure 75

Architectural, Engineering and Surveying Services

Effective:  7/1/1994

Supersedes:  N/A

Prepared by:  Cheryl Perry, Purchasing Manager

Approved by:  William B. Coleman, Jr., Town Manager

PURPOSE:

To provide a process of open competition for architectural, engineering and surveying services.

OVERVIEW:

North Carolina General Statute 143-64.31 states that it is the public policy of the State and local governments thereof, except in cases of special emergency, to select architectural, engineering or surveying services firms on the basis of demonstrated competence and qualification without regard to fee and thereafter to negotiate a contract for a fair and reasonable fee with the best qualified firm.  If a contract cannot be negotiated with that firm, then negotiations shall begin with the next best qualified firm.  North Carolina General Statute 143-64.32 authorizes local governments to exempt particular projects from the provisions of GS 143-64.31 in the case of:

      “(a) Proposed projects where an estimated professional fee is in an amount of less than thirty thousand dollars ($30,000), or,

      (b)  Other particular projects exempted in the sole discretion of the Department of Transportation or the unit of local government, stating the reasons therefore and the circumstances attendant thereto."

It is the official policy of the Town of Cary to exempt all projects where an estimated professional fee is in an amount of less than thirty thousand dollars and other particular projects from the provisions of GS 143-64.31.  (See Finance Policy.)  The reasons thereof and the circumstances thereto are that a policy of procuring these services through a process of open competition is in the best interests of the Town of Cary and its citizens.  Therefore, all architectural, engineering and surveying services contracts of the Town of Cary will be competitively bid and the award of these contracts shall be made on the basis of demonstrated competence and qualification of the firm making the proposal and the fee proposed to provide the services required.

SCOPE:

All architectural, engineering and surveying services contracts of the Town of Cary.

PROCEDURE:

1.       The department responsible for the construction or repair project will assemble a task force of at least three members to assure compliance with the provisions of this procedure.

2.       Each particular contract where the estimated fee for professional services is $30,000 or more must be exempted by specific action by Council from the provisions of GS 143-64.31.  To do so, the task force must prepare a resolution for Council action citing the reasons and circumstances for exemption.  (See exhibit)  This step is not required for contracts of lesser amounts.

3.       An advertisement for Statements of Qualifications will be made and will typically include an indication of:

a.       The type of project to be designed.

b.       The scope of services required.

c.       Any budget and time constraints.

d.       The evaluation criteria.

e.       The form in which the statement of interest and qualifications is to be submitted.

f.         The submittal deadline.

4.       A Request for Proposal will be prepared that will measure the competence of the firm in the required area(s) by typically comparing:

a.       The firm's experience with projects of a similar type and scope.

b.       The special expertise of personnel who would be assigned to the project.

c.       The expertise of any consultants.

d.       The location and availability of the project personnel and consultants.

e.       Time schedule.

f.         The proposed cost of the project.

g.       Specific information relating to the nature of the project.

5.       The Request for Proposals will be distributed to those firms selected by the task force on the basis of the qualifications submitted in response to the advertisement.  A pre-bid meeting prior to the opening of the Requests for Proposals with minutes distributed to all interested parties is strongly recommended.

6.       A staff report with the task force's recommendation of their preferred choice of the proposals received will be prepared for the appropriate Council committee for action.  This staff report will contain, at a minimum:

1. The nature, scope and history of the project.
2. The name, location and the length of time in business of each firm submitting a proposal and any other projects undertaken for the Town.
3. An explanation and/or definition of the criteria used to evaluate the RFPs.
4. How the task force used these criteria to judge the competence of the firm selected.

7.       The Council committee will review the recommendation as they deem necessary, make their selection and recommend approval of their selection to the Town Council.

8.       Any resultant contract will be executed following the Contract Control Procedures. (See Standard Procedure 34.)

REFERENCE:

            Finance Policy 112 (Finance Policy)

            Standard Procedure 34 (Contract Control Procedures)

EXHIBITS:

            Resolution to Exempt

            Example of Ranking Guide

RESOLUTION TO EXEMPT THE _________________________

PROJECT FROM THE PROVISIONS OF GS 143-64.31

            WHEREAS, North Carolina General Statute 143-64.32 provides that units of local government may in writing exempt particular projects where an estimated professional fee for architectural, engineering and/or surveying services is in an amount of thirty thousand dollars ($30,000) or more from the provisions of North Carolina General Statute 143-64.31 stating the reasons therefor and the circumstances attendant thereto, and

            WHEREAS, the estimated professional fee for these services for this project is in excess of this amount.

            NOW, THEREFORE, BE IT RESOLVED that the Town Council of the Town of Cary exempts this project from the provisions of North Carolina General Statute 143-64.31 as it is in the best interests of the Town of Cary and its citizens to procure these services through a process of open competition.

            Adopted this ______ day of ____________________, 19___

Ranking guide for architectural, engineering and surveying services

Project name: ____________________________________________________________________

SCORING:    1 = poor    2 = fair    3 = good    4 = excellent    5 = outstanding

Mr. Coleman stated the policy is based on the general statute, but it does give the manager authority to make the exemption. He stated the procedure details how staff implements the policy, the steps to solicit requests for proposals, identifies ad contents for statement of qualifications, identifies the required areas that architects and engineers should address in the request for proposal, and how the staff reviews the request for proposals and makes recommendations to council.

Mr. Coleman stated when the legislation passed, the council decided they wanted to see price, and staff developed a qualification based request for proposal process that allowed staff to look at price and to allow council to consider price when considering the award. He stated he is aware of issues from architects and engineers questioning whether the scope is adequate for their detailed analysis. He stated staff spends much time to do this completely and adequately and it is possible that sometimes the issues are not as clear to some as others, and staff depends on architects and engineers to work with staff and to ask appropriate questions. He stated the disparity is that some work with staff and some do not.  He stated that staff believes if we adequately scope the project and architects and engineers know that price is considered, then they will give their best price. He added that architects and engineers argue that price should not be considered in the beginning; instead, they would prefer that the Town first identify skills and abilities to do the project and then choose the firm most qualified and then negotiate the scope and the price. Mr. Coleman stated this lengthens the process for bid award, and it requires that staff know labor rates, professional rates, indirect cost rates, etc., which is difficult.

Mr. Bell clarified that a request for qualification process is actually a two-stage process with the request for proposals being the second stage.  

Engineering Director Tim Bailey stated he has actually heard from a design developer that requiring the price up-front causes them to be more competitive. He stated that staff doesn’t have the expertise to know what prices are good, but he stated three to four prices begins to show a good price.

Parks, Recreation and Cultural Resources Director Mary Henderson stated she has not heard complaints from architects, and she thinks the detailed up-front information provided by staff provides the council with information to make a good decision. She thinks architects are taking more time to cover all bases, which results in less surprises in the future.

Mr. Roseland stated the low bid was not chosen for the streetscape project. He stated there was a big price difference, but the differences seemed to be subjective.

Mr. Coleman stated unless a recommendation is made solely on a specific criteria, then there will always be a lot of judgment in the process. He thinks the process is good, but it breaks down sometimes with staff/bidder communication. He stated with the streetscape bid award, there was a 30 day window after the request for proposals went out and before the bid packages were due. He stated during that 30 day period, staff spent different amounts of time answering questions of individual firms. He believes this separated the quality of the proposals because some bidders spent more time on it and understood the requirements better. Assistant Town Manager Shivar stated there were only four bidders, and two were clearly better because they had more detail, addressed major issues, and had detailed process information. He stated price is based on elements of the proposal, and two of the bidders left out big price components (i.e., citizen involvement). He stated that pointed out a flaw in the current system in that the Town puts the burden on the bidding firms to clear up any gray areas. He stated staff has discussed offering one or two bid conference sessions when the staff of the bidding firms may come in and get the same information at the same time.

The staff and council discussed specifics of the streetscape proposal. Mr. Shivar stated staff did not think the low bid dealt thoroughly with construction administration and public input. He stated the staff committee wasn’t comfortable that the bidder understood the seriousness of these two areas. He reiterated that two of the proposals were clearly better than the other two.

Mr. Bell suggested mandatory bid conferences to ensure good communication with all bidders. In addition, he stated whenever staff has a phone conversation with one of the bidders, it may be good to document it and send the information to all bidders so that everyone has the same clarification and the same information.

Mr. Roseland stated better communication and bid conferences are constructive steps to take. He prefers a two-step process with the first step being to review qualifications to get the most qualified and the second step being to review cost proposals, and then request follow up best and final offers.

Mr. Bell stated this is an option and sounds similar to Winston-Salem’s system. He noted that the best and final price step could result in ill will, because bidders may feel they are being played against each other. He stated it would be important to have a clear process.

Mr. Roseland asked about the concept of value engineering. Mr. Coleman replied that staff sometimes makes design changes to reduce cost. Mr. Roseland asked what the Town is doing to push cost down by improving the process. He wants ideas on local preference.

Ms. Dorrel stated the council would need to determine how to define “local” for local preference purposes.

Mr. Coleman stated the Town does value engineering on the large construction projects and does partnering sessions with design engineers and contractors on major projects to review ahead of time the future problem areas and how we’ll address those issues, cost proposals, and time extensions to reduce the cost of problems on the project. Mr. Coleman stated with regard to best and final offer with all bidders knowing all prices given, he believes it would make architects and engineers nervous to do that and he believes council would get a lot of complaints. Mr. Roseland stated he wants to get the best value and the lowest cost through the process.

Mr. Bailey stated when staff likes a firm but their cost is too high, the staff will look for things to eliminate from the project. He referenced the comprehensive plan and stated the greenway plan had recently been done, so they removed this from the scope of the comprehensive plan project. He stated staff has the Town’s best interest in mind when considering cuts to the scope of services. Mr. Bailey stated staff is hiring a third party for value engineering on the treatment plant project. He stated the Town has a very thorough team project process for design projects, and staff has not found a lot of the value engineering stage that can be cut, because staff is always looking at the design and making improvements. He stated with construction bids if a contractor says they can do it cheaper, then the Town will share the savings with them. He stated if there is a way to do it cheaper after the contract is issued, then the Town issues a change order.

Mrs. Henderson stated the Town ensures representation from all Town departments in the bid award process, and this is important in finding the most qualified firm to do the work.  

Ms. Dorrel has full confidence that staff gets the best prices from the most qualified vendors. Her question is the way our process works and the interval between the time the request for proposal goes out and when it’s due back to the Town, specifically with communication. She believes the communication issue leaves us vulnerable, because bidders may perceive that we’re not being fair. She wants to tighten areas where people may get a sense they were not treated fairly and information wasn’t shared with everyone. She thinks the bid conference approach takes care of a lot of this. She added that information sharing in a one-on-one manner creates opportunities to be misunderstood, potentially creates an unbalanced playing field, and may contradict internal comments and interpretations. She wants to tighten that particular area and ensure that any information the Town provides to potential bidders is either provided to all or is only provided at a bid conference with a follow up memo issued to all parties after the bid conference.

Ms. Dorrel wants to know if the Town is getting a sufficient number of proposals or whether vendors choose not to bid on Cary projects because of our process. She asked how we factor in past experiences with a firm. She believes the Town’s streetscape bid evaluation was colored based on past experience with at least one of the bidders. She asked how we communicate a past unsatisfactory experience with a bidder. She wants to follow up more on the issue of local preference. She wants to know practices of other towns in NC; she’s hearing that Cary is the only town handling its bid process in this manner. She wants information on best practices in the state for towns Cary’s size or larger.

Mr. Bell stated he has not surveyed NC communities to know how everyone handles their bid process, so he cannot provide comparison information. He stated a community cannot take local preference into account when following the statutory bidding procedure; however, if the town has exempted itself from the statute, then it does not follow the statutory procedure. He’s not sure of the legality of local preference, as there may be a potential problem under the federal constitution’s commerce clause about impeding interstate commerce. He suggested that legal staff do research to determine: (1) whether it is legal and (2) whether Cary need a local act for local preferences. Mr. Bell stated engineers and surveyors in particular have professional rules that require that price should not be considered. However, it is a legal process, so he does not think this is a valid rule for those organizations. He added that these professionals are concerned about losing their licenses. He stated it may help to alleviate this concern by stating up-front in the request for proposals that this project is exempted from the statutes, and this might encourage more competition. Mr. Bailey stated the staff attaches the exemption with to the request for proposal.

Mr. Roseland asked the Town’s process to survey the vendor community. Mr. Bailey stated we must have minority participation and outreach and it must be publicly available. He stated the Town currently posts the information on the Town’s Web site. In addition, he stated staff encourages people to sign up for the listserve. Public Information Officer Susan Moran stated that there are currently more than 100 subscribers to the list who get the request for proposals.

Mr. Bell stated some towns have “plan rooms” that allow contractors to come in and look at plans. Mr. Bailey stated the Town does this for all construction projects and sends plans at no cost to minority firms for distribution. He stated Raleigh has a MWBE Vendor Directory (Minority and Women-Owned Business Enterprises), and The Town of Cary does direct mailings from this list. He added that non-MWBE members don’t have this luxury.

Mr. Roseland is interested in marketing request for proposals to as many vendors as possible. Mr. Bailey stated Earth Tech is an example of a vendor who in the past would not bid on Cary projects because Cary requires prices up-front. He stated over time the Town has convinced them of the importance the Town places on quality, and as a result, they now bid on Cary projects.  

Ms. Dorrel asked how the Town considers negative past experience with bidders. Mr. Bailey stated staff considers this. He gave an example of a recent less than satisfactory experience with a sub-contractor. He stated staff communicated this with the general contractor and not the sub-contractor. He stated the general contractor may decide to share or not to share this information. Mr. Bailey stated some firms do surveys to find out how things are going, and staff provides honest feedback; however, staff cannot force this interaction. Ms. Moran added that the firm in this situation is not on the town’s listserve to receive request for proposals.

Mr. Coleman stated he will be happy to get representatives from engineering and architectural associations to talk to the committee about the bid process and why they think qualification selection without price is the best alternative.

Mr. Coleman stated he will take elements of today’s meeting and re-write the procedure to include bid conferences, specify how we deal with addendums for architectural and engineering services, specify how we solicit for proposals and how we advertise, add something about bid negotiation after the bid is awarded, be more specific about how we factor past experience, and bring the local preference issue to council to let them decide whether to pursue it further.

Mr. Roseland stated there must be fairness and we should prevent misconceptions. He agreed with Mr. Coleman’s proposed process improvements, and he wants to apply them to any project of significance. He agrees we need the council to weigh in as a group on the issue of local preference.

Ms. Dorrel is not interested in changing from a request for proposals to a request for qualifications process and doesn’t want this to be the place where the industries debate the issue. She is comfortable with the request for proposals process. She has not heard a lot about the experiences and perceptions of other bidders, other than one unsuccessful bidder first-hand and another unsuccessful bidder second-hand. She does not want to reopen the question of request for proposals vs. request for qualifications. Mr. Coleman suggested a sample of architects and engineers that have done business with the Town to review what they like and dislike about the process.

Mr. Roseland suggested a focus group to provide vendors the opportunity to give constructive feedback. He stated the committee may not need to be part of the focus group. Ms. Dorrel suggested that staff determine the best way to do this.

Mr. Coleman stated staff will state up-front that the decision has been made that the Town will still get prices up-front, and the focus of the focus group will be on process improvements, in particular the communication issue. He thinks it is important that everyone is clear about the purpose of the focus group up-front. He stated staff can facilitate the focus group, and the committee members may participate if they choose to do so.

Mr. Coleman stated after the focus group the staff will send policy revisions to the council. He stated staff will take the issue of local preference to the full council and give Town Attorney Simpson the opportunity to give her opinion at that time.

Mr. Bell suggested having possible process changes written down for the benefit of the focus group to provide them something to react to and to clarify potential process changes.

The committee decided they do not need to meet again. Mr. Coleman will advise the committee of the date/time of the focus group meeting, which will be held in the next couple of weeks, and then staff will report to the council.

The meeting ended at 2:38 p.m.