MSW Management | Managing the Bid Process, Part One: Bids and Squalls

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Those involved in projects that are bid have opinions colored by their role.

The concept of public bids is founded on excellent principles. The money is spent on behalf of the taxpayer, and a bid tries to make the pricing competitive, from qualified bidders, so that the public gets good value for its money. Public bids also support the transparency of business conducted by our elected officials and their staffs. A public bid should be able to look reasonable upon public scrutiny, and it should enable us to avoid any accusations of favoritism, nepotism, and corruption.

Technically, when the bidders compete publicly, they are able to provide data on their equipment, products, and services that are as up-to-date as possible. Another aspect of public bidding that is most pertinent in some communities seems to be that it prevents a monopoly by awarding contracts on the basis of the quality of the goods offered, their price, and the ability of the bidder to provide what is truly wanted. The tales of yesteryear would describe contracts going to relatives of the mayor, to companies who offered the best bribes, and to local contractors quite unqualified to perform work at new levels of competence. That’s why bids became public, by law, to stop all that harmful waste of the public’s money.

So why are public bids so unpopular with many professionals, on both the supply and the demand sides? Why has this become such a personal matter?

Few of the persons with whom we corresponded were indifferent or even calm about the subject of public bidding. Their comments were candid and blunt. Most of them did not want their names mentioned, lest their opinions should harm their positions or careers in any way. We have respected that request, even if we think it’s ominous that it was made.

“I personally hate the bid process,” comments the manager of a landfill in California. “It shackles my program and erects obstacles to timely action. When I need something, I frequently would like to take less than two or three months to make the purchase. The rules are set by politicians and lawyers, not by people in the field. Some suppliers do try to avoid the bid process, but many others just decline to pursue government contracts at all. I find there is more effort made to go around the process on the part of managers, department heads, and others who need to get things done within shorter time frames than the bid process usually provides.” That manager’s comments have been repeated and supported by others with similar responsibilities.

If there is a key phrase in that candid observation, it may be “others who need to get things done.” The onus for good performance is usually, ultimately, on the people in the field, the employees who are actually doing the solid waste management work where the solid waste resides. It is these people who are frustrated by the apparent slowness of the paperwork vehicle. Lying underneath this resentment of control by persons who may not understand the actual problems in the field is the (usually unspoken) annoyance that the qualifications of field personnel to evaluate equipment and services may be deemed inadequate for purchasing decisions.

“For the evaluation of bids, I think there is adequate flexibility, provided there are enough qualified bidders to make a choice possible,” notes another site manager, recently upset by the failure of a bid to find the right solutions. “Often the contracts seem to be so structured that there are not enough qualified bidders to choose from. When you have to re-list the bid, it really sucks.”

Many field managers would prefer to conduct their own research, make their own contacts, and choose a contractor that offers the service closest to their needs, a contractor with whom they feel comfortable working.

“I don’t like to choose contractors just because they had the cheapest bids,” says yet another manager. “Character counts, and it often does not express itself in a bid proposal.”

Two Sides To This Problem
If you’re a supplier, vendor or sales representative, don’t imagine that everything is simple and easy for the people in public positions with whom you work, especially those who are involved in the bidding process. Public employees have frustrations and questions, too. Because of confusion caused by changes in purchasing techniques, the State of West Virginia (through its purchasing department) provided some helpful advice for employees. It came up with 20 frequently asked questions and gave helpful answers to them. We won’t mention all of them, but here are a few that you may appreciate.

While a purchase order is not required for an item under $2,500, the state recommends that “it is always best to contact two or three vendors to get the best price.” That sounds like sensible, perfect advice, good for buyers and sellers, doesn’t it? Employees are warned that it is an ethical violation to accept tickets for NASCAR or University of West Virginia events from vendors. The state has a contract with one computer manufacturer and employees are informed of that. If the solid waste management employee requires services, it should be remembered that the providers (they could be truck rentals, for example) must meet the corporation, government, or nonprofit guidelines in the state’s purchasing card rules.

What about emergency situations? “An emergency purchase does not make competitive bidding exempt,” advises the state. “It only means that you have to get the bids in a quick manner. Sometimes it is not possible, and you will need to justify the purchase when this happens.” You can see where that emergency situation may cause headaches for purchasers and vendors; you can also see that common sense is going to prevail. This train of thought progresses to a question about the amount of time a vendor should be given to prepare a bid. The advice is that, while there may be no specific time declared, the vendor should have enough time to prepare a bid adequately. How much time would that be? West Virginia says: “Normally a period of at least one to three days is sufficient time. There could be circumstances that change this. But, as long as you have three valid bids, this is fine.” And here’s another most sensible response to a question. Asked if a vendor may be told to start work once the purchaser knows the company has the lowest bid, the state says “no.” Until you have that official purchase order in hand, you should tell the vendor nothing.

Other states offer similar guidelines, and we think they’re imp

rtant, because they do show that the purchasers are trying to be as thorough and honest as they can be in the matter of public bids. This, of course, does not help resolve the problems caused by vendors or contractors who do not wish to be involved in public bids. Their absence means that the best solution is not always available to the solid waste manager. Has the situation improved in recent years in your community? One step from public authorities that has been welcomed by vendors and purchasers alike is the pre-approved list of service providers. “That stops us worrying about things like insurance for our suppliers,” notes Robert Edmiston, in solid waste management for Mesa County, on the western side of Colorado. “A pre-approved list of suppliers is an excellent tool for all purchases. We are also provided with base contracts, and they are most helpful.”

“Our aim is to treat everybody fairly,” comments Michael Hnatin, an engineer in Lycoming County, PA. The landfill there takes in 1,200 tons per day and serves six counties. The population of the area is about 350,000 and there are about 90 different entities who make collections of garbage (some of them with as few as 20 or 30 customers). “The best price is not necessarily the lowest,” adds Hnatin. “We must take into account such aspects of potential bidders as experience.

hose who bid are pre-qualified according to several professional considerations and for professional services. We have specific requirements that would have to be met before any bidding process.”

Let’s return to emergencies for a paragraph. One wise man with whom we spoke was John Baron, solid waste program manager at Cape May, NJ. “Poor planning can make emergencies,” he says. How true! Baron also explains that there may be differences between buying equipment and buying something more complex, such as engineering services. For equipment, the lowest price is always the guideline, even if the people requiring the equipment know they may not be getting the best products and (more often, it seems) not anticipating the best service after the sale.

When you require services, you may reject the lowest price because there is another, more appropriate offering that includes other considerations with legal standing. When you are buying equipment, there will be several models from different manufacturers that all claim equal capabilities (features like engine size, wheels and tires, or bucket dimensions), but the after-the-sale features may vary enormously. Some vendors seem to have virtually no service program, while others are diligent in their keeping in touch with users. “When the lowest price rules, service may be completely ignored” has been a common complaint.

Providers’ Point of View
“A lack of responses to a bid request indicates either a lack of interest among the appropriate companies, a lack of understanding the bid specifications, or an inability to provide a cost-effective solution to the bid,” notes Everett Bass, vice president of community relations and public sector services at Waste Management Inc. “Sometimes the bid requests services that would not be cost-effective for a company to provide.”

Asked if he noticed any flexibility in the evaluation of public bids, Bass had some interesting comments. “There are several types of bids and they each offer varying degrees of flexibility. A low bid has no flexibility, while a ‘best’ bid looks for the lowest bidder but also incorporates factors such as customer service and performance history. The lowest responsive bid means that a company provided the lowest bid but was not responsive to the bid’s specifications. A request for proposal has the most flexibility because it factors in components such as price, service history, minority/women participation, equipment age, and financial insurance.”

Asked what improvements his company would like to see in the bidding process, Bass made these remarks. “We’d definitely like to see less red tape. Vendors bid higher if they have to bid on clauses and other items in the contract that do not have a defined cost. That leaves the bidder to assume in his response. For example, if a contract requires a bidder to collect ‘unlimited brush debris,’ how much is that? It could turn out to be quite costly. But if the contract says ‘three cubic yards of debris per household,’ then the bidder can make an intelligent response. The procurement vehicle should clearly define the parameters of the job expectations,” concludes Bass.

Other factors mentioned that could result in high bids are a short turnaround time for the response, no pre-bid meeting, and no answer to issues brought up during a pre-bid meeting.

With today’s rising fuel costs, a component for fuel adjustments may be a key element to a bid.

Legal Considerations
“New Jersey has had laws governing public bidding for decades,” advises Kathleen Marchetti, one of the counselors at law with Budd Larner in Short Hills, NJ. “However, there were those in the legislature and in government who believed that the public bidding process was subject to manipulation. In the 1990s, the legislature amended the law with regard to solid waste contracting, requiring the promulgation of uniform bid specifications, in order to ensure more uniformity in the process. Those uniform bid specifications set forth common definitions and procedures that should govern the process—definitions and terms that cannot be modified to limit the field of bidders or provide an advantage to one or more over others.

“While the regulations have provided some uniformity to the process, challenges are still brought which are costly to maintain and some municipalities (we have hundreds in New Jersey), for unknown reasons, occasionally disregard uniform bid specifications,” continues Marchetti. “That failure on the part of the contracting unit forces bidders to decide prior to the bid submission whether to challenge the published specifications or submit a bid and hope no challenge is made. Case law had developed barring a bidder from challenging bid specifications if he or she submitted a bid in response to those specifications and later complained that they were anti-competitive or confusing. The legislature has since codified that by requiring written objections prior to the submission date, affording the municipality the time to amend the bid specifications if necessary, as well as providing that challenges not raised before the opening of the bids are void.”

Despite these changes in the law in New Jersey, challenges to the bid process are still an expensive part of the landscape. Prospective bidders are important to the process because they act as private attorney generals, self-policing the fairness of the bid process and forcing transparency. Since litigants in New Jersey bear their own attorneys’ fees, Marchetti adds, even a successful challenge can cost. Those expenses are naturally difficult for small companies to bear.

Here are two cases that were settled by law. We have changed the names of parties involved, but the facts are real. In the case of Local Disposal v. the Township of Lindsay et al., Local challenged the awards of a solid waste collection contract to the subsidiary of a large company, National Collection. The complaint was dismissed at the trial level, but the company prevailed on appeal. The essence of the challenge was that, after certain post-bid discussions with municipal officials, National Collection was permitted to change its bid. Under the case law of the state and the state statutes that govern public bidding, post-bid adjustments are not permitted.

National Collection argued that the discussions did not result in post-bid adjustment, but were simply intended to clarify that its “no bid” for an aspect of the advertised service was in actuality “no charge.” The appellate court described that as “nothing short of post-bid manipulation, the effect of which was to steer the award to National Collection, which was not entitled to it based on its bid proposal.

“This process afforded National Collection a decided unfair advantage over other bidders.”

Another aspect of the challenge concerned a contractual agreement for services advertised for public bid but consummated outside of the bidding process. That arrangement, when discovered, was argued to be a settlement of a double billing claim. The appellate court concluded that the arrangement was a “subterfuge” to further manipulate the contract award.

When Shoreline Sanitation was involved in litigation against the City of Aster et al., the dispute involved a technical challenge to the wording of the consent of surety (a bid guarantee required by the bid specifications) submitted by Shoreline, which had been awarded the contract. The trial and the appellate courts dismissed the complaint, permitting Shoreline to perform the contract at issue.

The essence of the Shoreline decision was that a document submitted as part of the bid submission was clear on its face and as a matter of law conformed to the specifications promulgated by the contracting agency, and the submission of that document did not provide a bidder with a competitive advantage over other bidders and presented no harm to the contracting agency. “These are themes that repeat themselves in the statute, regulations, and the case law,” says Marchetti.

The conclusion that we have reached from our conversations and readings (in other words, our education) by experienced attorneys such as Marchetti is that there are still companies and individuals out there who will try to bully or trick their way into lucrative contracts, often because the public authority concerned has not been careful enough in its requests for bids.

From the very beginning of any request, make sure it is written in such a way that there can be no misunderstanding. What is included in “collection?” What items may be special collections?

Your local county attorney may not be the best person to do this, because he may not have the necessary experience or knowledge.

“What the contract actually says” is of supreme importance, because room for argument or interpretations within the paragraphs of the bid makes room for the very cheating that public bidding was developed to prevent.

Every public authority that publishes bids for its solid waste management requirements (equipment, products, or services) should know the state rules and follow them. Confusion in a bid can spell disaster for all parties concerned. Bass made the point that some companies or individuals do go around the bid process by submitting alternate bids. They want to get other options on the table for discussion. As the deal is not done until the contract is signed, individuals and companies will still work the deal to acquire the business. Does your bid include everything needed for a good result? Is it readily understood by bidders?

Author Paul Hull writes on environmental topics for several international magazines.

(Editor's note: In the next issue of MSW Management we will report on solutions that people from all sides of the public bidding process offer to make that process easier and more efficient. If you have suggestions, please send them to us. Please e-mail your information and opinions to Paul Hull at peh@midrivers .com.)

MSW - March/April 2007