Be Careful in your Bond Agreements
Below is a good article on a bid bond and how your bonds can be called into question by related deals. Specifically, it is all about a side agreement that allows for the pooling of resources. This arrangement is not a bad one, but one of the keys is that the bonded contractor was going to allow the other contractor to utilize their bond in order to perform the work. That’s not necessarily wrong, but you do need to be sure that it doesn’t violate the underlying job documents.
Main Street Project Halted Due to ‘Invalid’ Subcontractor Agreement
The stoppage of a major construction project on Main Street St. Thomas has at least one senator calling for Public Works Commissioner Gustave James to come clean about the details and the suspension of millions of dollars in associated Federal Highway Administration funds.
“I have managed to obtain a copy of the correspondence suspending the funding, and must say that I was deeply disturbed by what I read,” Sen. Jean Forde said in a statement Monday. “As such, I have written to Commissioner James in an attempt to get a complete picture of what has happened, why it happened, and what we can expect for the future regarding the Downtown Revitalization Project. In an economic and political atmosphere in which the Virgin Islands needs and will have to fight for every federal dollar we get, we simply cannot afford to leave monies on the table.”
According to the letter from Federal Highway Administration official Michael Avery, funding for the project was suspended because of an unapproved partnership between contractor Tip Top Construction and subcontractor Prestige Building company, which he said was not prevously disclosed during the bid award process.
While the Source has not been able to reach Public Works or Tip Top representatives for comment, it has, like Forde, also obtained a copy of the letter from Avery, which was sent late last week to both Public Works and Property and Procurement commissioners. According to the letter, FHWA said the contract executed for the project required a payment and performance bond from contractor Tip Top, which was able to satisfy the requirement through a “teaming agreement” with Prestige, executed last September.
“Such a contingency is not acceptable since it was not disclosed during the Payment and Performance bond evaluation process, the teaming agreement was not submitted with the bid package and was not approved by VIPW (V.I. Public Works) during the award process,” according to the letter from Federal Highway’s Michael Avery. “In addition, Prestige is not a signatory nor an approved subcontractor for this contract.”
Avery said that since the payment and performance bond appears to be invalid, Tip Top could be in breach of contract, which would consequently put the company in default.
“Therefore, FHWA will suspend federal eligibility of this contract from the date of this letter until the matter is resolved,” Avery wrote.
According to the contract documents, Tip Top and Prestige’s agreement allowed the companies to pool their resources for the project, which includes the construction of a “new historic streetscape with underground utilities, concrete pavement, cobble paver and landscaping, and all related management.” The performance bond guaranty was signed on Sept. 15, 2015, by both company presidents.
The document also provides that Prestige, as the subcontractor, shall provide surety for the project along with “full financial control of the contract proceeds through a mutually agreed escrow account controlled by subcontractor.”
Contract documents also include copies of the $8.4 million performance bond, which names Tip Top Construction as the principal.
In his statement Monday, Forde said he was particularly concerned about the impact on workers who could be laid off or terminated because of the stoppage and suspension of federal funding.
“The monies that will not be released to the territory over the coming weeks or months would otherwise employ workers who need to provide for their families, particularly with the holiday season upon us,” Forde said in his statement. “As such, I call upon the Department of Public Works to take all possible steps to resolve this matter as soon as possible so that our people can get back to work, and so we can continue the process of revitalizing the Charlotte Amalie downtown area.”
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via Blogger An Invalid Subcontractor Agreement leads to a Bid Bond Headache
Below is a really good article on bids and how they can go awry. As you can see, there are legal threats and lawsuits being planned by the contractors whose bids were not accepted. The bids, like in many cases, were a wide range – going from $4.6 to $6 million. It appears that several of the contractors were deemed “nonresponsive,” which is bid talk for “hey, you didn’t dot every I and cross every T.”
Unfortunately, the contractors have some good defenses to this. First, they are stating that the documents that were not submitted were not required by the bidder – but instead only by the one awarded the bid. Thus, these documents cannot be used to disqualify one for a bid. And it goes on.
Easy. Make sure that you have every I dotted and T crossed. Then call the RFP place and ask questions. It will save time and heartache later.
ARCATA – For the second time in three months, the contract for a major Arcata project is being protested by contractors whose bids were declined. The contract award for the Humboldt Bay Trail North, which is Phase II of the Arcata Rail With Trail Connectivity Project, has been delayed, but that probably won’t interfere with the project’s April construction unless new legal threats are carried out.
The project will link Arcata with Eureka via a three-mile, Class 1, ADA-compliant bike and pedestrian trail from Samoa Boulevard to the U.S. Highway 101/Bracut intersection. Located on the North Coast Railroad Authority’s disused rail easement, the trail is part of the Humboldt Bay Trail, and will become part of the California Coastal Trail.
With the town section already complete, planners hope the 4.5 mile Arcata path will will lure commuters away from their vehicles and eliminate more than 60,000 car trips by offering a human-powered path between local destinations.
Building the new segment will be lucrative for whichever contractor gets the job. Bids from five contractors were opened on Oct. 19, and they ranged from more than $4.6 million to nearly $6 million.
The lowest bidder, Stewart Engineering, was deemed “nonresponsive” and disqualified due to failure to include a “Non-Collusion Affidavit.” So was Steelhead Constructors, Inc., the third-lowest bid. That firm also failed to sign an addendum.
The Non-Collusion Affidavit, required by state law, ensures that bids are not being submitted on behalf of others, that bids are genuine and not submitted to thwart or discourage other bidders. Basically, it helps keep the bidding process honest and transparent.
The highest bidder, Wahlund Construction, was also deemed nonresponsive, but for a different reason – the “Concrete Structures” portion of its bid was left blank, rendering it incomplete.
That left two responsive bidders, McCullough Construction and Mercer-Fraser Company. McCullough’s was the lower bid, and though its bid also contained flaws, the city deemed the errors more or less on the level of typos, and nonconsequential.
A staff report recommended that McCullough be awarded the contract at last week’s City Council meeting.
But it wasn’t to be. A cascade of bid protests by rejected bidders followed, some threatening legal consequences for the city. The technicalities of their arguments are almost as intricate as the specs for the physical trail itself, but fascinating as they attempt to magnify mistakes by others so as to renew their chances for the lucrative contract.
The protest letters
Mercer-Fraser’s Oct. 24 letter contends that the affidavit is required of the “awardee,” not bidders, since no one is an awardee until the contract has been awarded. It also found a flaw in the winning McCullough bid – an erroneous subcontractor address – and argued that that bid also be deemed nonresponsive. The letter concludes by threatening “legal action” and recommends that the project be re-bid.
Steelhead Constructors also protested the finding of its bid as nonresponsive on Oct. 24. It noted the “awardee” issue, but also said that the city violated contract code by failing to provide a Non-Conforming Affidavit form. It further described the lack of a signature on an addendum as “immaterial,” since its bid made repeated references to the addendum. Steelhead asked that its bid be deemed responsive or that the project be re-bid.
Stewart Engineering also weighed in with an Oct. 24 protest. It noted that its bid was the lowest, and cited the “awardee” language to contest the finding of nonresponsiveness. It also says that its signature on the bid negated the lack of a signature on the addendum. Those irregularities must be waived just as McCullough’s were, the company stated, and the law requires that Stewart, as the lowest bidder, then be awarded the bid.
On Nov. 2, the day of the council meeting, still more letters came in.
The Construction Industry Force Account Council, which describes itself as a nonprofit group that monitors contract code compliance, weighed in. It expressed concern that “the waiving of some irregularities and not others may lead to a perception of favoritism, unfair bidders advantage and a challenge of the fairness of the process.”
The council called the affidavit requirement “confusing at best,” and urged a re-bid as “the cleanest and safest way to proceed.”
Redding law firm Reese, Smalley, Wiseman & Schweitzer, LLP wrote on behalf of McCullough, the winning bidder. It took to task Mercer-Fraser’s bid protest, arguing that the lack of a signed affidavit is “not a minor irregularity. This is a material part of the bid.” McCullough’s attorneys also noted Stewart’s lack of a witnessed signature on a document.
The Operating Engineers Local Union No. 3, which represents some city workers, found equivalence in all the bid irregularities. It recommended that since four of the five bidders had irregularities, the lowest bidder, Stewart should be awarded the contract in order to save the city $200,000. If the city considers the mistakes unacceptable, the union said, it should give the job to Mercer-Fraser, which submitted the only error-free bid – or it should re-bid the project altogether.
Mercer-Fraser weighed in again, repeating its argument about the “awardee” interpretation. It held that “ambiguity” in the bidding documents led bidders astray. It further argued that McCullough’s bid was nonresponsive due to what it said was a missing signature.
Mercer-Fraser’s letter states that it wants its objections on the record “in case a complaint is filed with a federal office that represents the grant monies for this project” to help with any determination as to whether federal law had been violated.
Lastly, McCullough’s Redding attorneys had more to say, this time about the other companies’ bid protests. It said the problems with Stewart’s bid were dealbreakers. The lack of a signature on a bid bond could make the bond invalid, and allow Stewart to withdraw from the project without forfeiting a bond. It said Steelhead’s lack of an affidavit violated requirements. It also dismissed all of Mercer-Fraser’s arguments and claimed that that company and Steelhead had failed to provide McCullough copies of their protests, and that Stewart had done so after the legal deadline.
The council meeting
Before the City Council last Wednesday, Interim Special Projects Manager Katie Marsolan said the trail project addresses multiple goals for the city. It has been in the works for a long time, she said, and that should not be overlooked. “This is a huge, exciting moment for us,” Marsolan said.
City Attorney Nancy Diamond defined what makes errors either consequential and disqualifying, or immaterial. Errors considered nonconsequential, as defined by case law, are those that:
• do not affect the bid amount;
• do not give a bidder an advantage over others;
• are not a vehicle for favoritism;
• do not prohibit other bidders from bidding;
• do not prohibit comparisons between bids.
The Non-Collusion Affidavit, Diamond said, is required by state law to prevent sham bids and ensure that the proposals are authentic. She called the mistakes “an unfortunate oversight on the part of the bidder.”
City Councilmember Susan Ornelas questioned why so many contractors were tripped up by the process.
Diamond said the contractors had ample instructions as to the state’s affidavit requirement. “It’s only confusing because they’re making it sound confusing,” she said.
Ultimately, the council chose to put off the contract decision. It will next reconsider the matter Nov. 16.
In August, a bid for modifications to the Jolly Giant Dam also drew a protest over a missing signature on an addendum. But city officials said the addendum had been mislabeled and that it was really an attachment, so the missing signature was inconsequential.
via Blogger Bid Bond Brouhaha
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