Glenwood may include local preference incentive on project
October 14, 2009
GLENWOOD SPRINGS – Glenwood Springs City Council will discuss a proposed amendment regarding the city’s local preference rule relating to the bidding process of the wastewater treatment facility construction.
Council was asked to review a proposal from Mark Gould, president and CEO of Gould Construction, to create an incentive for pre-qualified contractors to use local sub-contractors in the wastewater treatment plant bidding process and project.
According to a memo from City Manager Jeff Hecksel, a review of Gould’s proposal was done and presented to council at its Oct. 1 meeting.
Gould’s original proposal sought to add incentives to the bidding process that would encourage the contractor to utilize local subcontractors. The bidding process would award contracts based on a point system where 90 percent of the score is based on cost, and 10 percent is based on the contractor’s use of local subcontractors. Essentially, a contractor with a larger bid could be the more cost effective option by using more local workers in the project, Gould said.
His new proposal capped the city’s incentive amount at $250,000, or 2.5 percent of the total local contractor bid price. For example, if the general contractor bids $25 million on a project, but has $10 million in local contractors tied to the project, the city would give that contractor 2.5 percent, or $250,000, in local preference incentives. The incentives could make the general contractor with the higher percentage of local workers come in as the lowest bid.
The benefit to the city, according to Gould, would be that while the city gives the contractor $250,000 in incentives to use local contractors, the $10 million paid to local contractors would stay in the local economy.
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“The market will work to where this will cost [the city] less because no contractor is going to want anyone else to have a $250,000 advantage, and never have one local subcontractor,” Gould explained to council. “So, you are really not going to have someone who wants to self perform all the work.”
Gould also submitted a similar proposal to the Garfield County Board of County Commissioners in September as well. The commissioners have yet to make a decision on that proposal, either.
Mayor Bruce Christensen told council on Oct. 1, “This is something that conceptually we strongly support, and we’d like to find a way to balance it so that we can do it without financial harm to the city.”
However, Christensen said that he would rather see a simplified formula specifying that the city has the right to weigh bids upon the assurance of a contractor’s use of local workers, up to a specified dollar amount.
“I think that is something we would like to see if we can do,” Christensen said.
Bids from the seven pre-qualified contractors selected for the wastewater treatment project are due on Oct. 23. While the city has encouraged local contractors to submit bids to the general contractors, Gould’s argument is that “encouraging” contractors to use local workers is not an incentive.
The city has already paid, or awarded contracts in excess of $6 million, including engineering and construction of the local access road and force main along Midland Avenue, according to a memo from Jeff Hecksel to council.
The memo stated that while the city’s current local preference rule may not meet the needs of the community, developing a “well thought out and analyzed code amendment to better meet the needs of the community will likely take months,” and “is not likely before bids are due Oct. 23, or even if delayed a couple of weeks.”
The city’s recommendations to council is that the city continue with the current bid process for the wastewater treatment plant.
If council decides to proceed with the current wastewater treatment bid process, bids will be received and will be reviewed by council. If council finds the bids unsatisfactory, the current code allows council the right to reject the bids.
If council decides to delay the bid process until an amendment to the current code is developed, “this will delay and change the bid process,” the memo stated. And, “delaying the process could result in a loss of qualified bidders, as well as increased cost.”
However, the council could choose not to follow the city’s code and ask staff to issue an addendum to the bid specifying some requirements or incentives for contractors to include local subcontractors.
“The definition of what constitutes a local-subcontractor and what requirements or incentive would be would have to be thoughtfully considered to ensure the city and ratepayers do not incur needless additional expense,” the memo stated.
City Council will discuss the issue at its regularly scheduled meeting Thursday at 6 p.m.