The Des Moines City Council recently approved a taxpayer quality assurance policy. The policy will apply to construction projects that are estimated to cost in excess of $1 million, bid and constructed by the city of Des Moines and funded without state and federal money.
It is not clear why this policy is needed.
The policy supposedly will provide justification for spending more taxpayer dollars on these projects as opposed to awarding the projects to the lowest responsible bidder. It appears this will be justified by stretching the definition of "responsible."
For these projects, the council members will now be thrown into a subjective process of selecting the contractor that will receive the contract. Expanding the definition of "responsible" is a slippery and uncomfortable slope.
The vague reasons cited are far from justifying costing the taxpayers more money and putting the council members in the position of hand picking who will be awarded city contracts.
The only new tool that will be provided to the city is a new questionnaire. It certainly is not close to the scrutiny that is already done by the insurance companies when underwriting whether or not to provide a bond to the contractor. The questionnaire appears to try to determine whether or not the contractor is a union firm. This should not be the primary consideration for awarding contracts on public projects.
The new questionnaire is unnecessary. Bidders on these projects have already been prequalified. With their bid, the contractor includes a bid bond. This is the assurance to the taxpayers that a licensed insurance company has prequalified the bidder. It is a promise that the lowest responsible bidder will provide the bonds to protect the project owner and subcontractors, suppliers and laborers providing services to the project. The insurance company's assets back that promise to the public owner.
Being in the prequalification business, I am familiar with the process a contractor must go through in order to obtain these bonds. Beyond the Contractor Insurance company's own questionnaire, much more information is underwritten and scrutinized. This information includes a thorough review of the contractor's financial performance and financial strength, their other projects on hand, their credit quality, their bank relationship, references from owners of past projects performed, and a review of each owner's personal financial condition.
What does the city gain by adding to this process? There is nothing wrong with the city requiring a questionnaire to be submitted when bidding a city project.
What will create a problem is when the city determines that the award should go to a higher bidder. Not only does this directly conflict with the state laws that require contracts to be let by competitive bidding, but the appearance of, and perhaps in reality, favoritism or cronyism will occur. This would result in a much higher frequency of appeals by prequalified contractors with responsible lower bids, thereby causing delays and increased costs, including legal fees.
As quoted in the article, "The city of Des Moines has built over a half-billion dollars of infrastructure without a major project ending in a litigation stalemate of stopped work and escalating claims." This implies that the current prequalification process is not flawed. What is the City Council trying to fix?
My employer specializes in underwriting and providing these bonds, called surety bonds. For full disclosure, my company and our competitors will charge more premium dollars for bonds on higher bidders because the premium is based on the contract amount. Yet, I disagree with the city's new policy.
Source: http://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2014/11/03/larry-taylor-new-des-moines-bid-policy/18395001/
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