TO:

HONORABLE MAYOR

AND CITY COUNCIL

 

FROM:

Richard Doyle

City Attorney

SUBJECT:

Adopting Prequalification Policy And Procedures

DATE:

October 30, 2003

 

RECOMMENDATION

 

1.         Adopt a resolution implementing a policy and appeal procedures for the prequalification of contractors on public works projects.

           

2.         Direct the City Manager to return in one year with a status report regarding prequalification and recommendations on whether to continue and/or modify the prequalification policy and appeal procedures.

 

 

BACKGROUND

 

At its September 30, 2003 meeting, the City Council took a number of actions related to Getting Families Back to Work.  One of those actions was to direct the City Attorney to prepare a prequalification policy for Council approval on or before November 4, 2003.

 

The proposed resolution responds to this Council directive.  Attachment “A” of the resolution is a prequalification policy applicable to public works construction contracts.   Attachment “B” establishes an appeal process for a potential bidder to dispute a determination by the City that it is not qualified to bid on a public works project.  State law requires establishing such an appeal process.

 

The City Attorney’s office has coordinated this item with the Department of Public Works.

 

 

ANALYSIS

 

1.         Prequalification

 

The City Charter requires the City to bid and award to the lowest responsible bidder public works construction contracts over $100,000.  A bidder is “responsible” if it is trustworthy and has the ability to successfully perform the scope, size and scale of the proposed work under the terms and conditions of the construction agreement.

 

Prequalification involves the City requiring potential bidders to demonstrate, before bidding, that they meet specified minimum qualification and responsibility requirements.  These requirements must be fair, reasonable, related to the scope, size and scale of the project, and not otherwise overly restrictive in terms of stifling competition.  A potential bidder that does not meet the specified prequalification requirements is prohibited from bidding.  Prequalification can be used to qualify bidders for a single project or to qualify a pool of bidders for a series of future projects involving similar work.

 

Although “responsibility” may be determined at the time of bid opening, making this determination as part of a prequalification process is often more beneficial.  It provides an opportunity for the City to more fully determine the qualifications and responsibility of potential bidders.  And by determining responsibility prior to the bidding process as opposed to after bids are opened, prequalification reduces the likelihood of a bidder challenging a determination that it is not responsible.  Moreover, prequalification potentially reduces project costs and project-related construction delays, and promotes the proper and safe completion of projects in conformance with the contract requirements.  It helps the City obtain the highest quality for the lowest price.

 

However, prequalification also can reduce the number of contractors, including new and small contractors, who might otherwise bid on projects.  It also adds another layer to the contractor selection process, which potentially adds both significant time and cost to a project.  And because prequalification can only test for minimal qualification and responsibility requirements, it does not guarantee that only the most qualified contractors are prequalified.

 

In short, any policy must consider that prequalification is not warranted for every public works project.

 

2.                    Proposed Prequalification Policy

 

The proposed policy recognizes the advantages and disadvantages of prequalification.  It provides for the director of the department responsible for bidding a public works project to prequalify prime contractors, subcontractors, suppliers and/or manufacturers of critical project components when he/she determines that doing so would provide a net benefit to the City.  The proposed policy establishes a framework for the director to determine when prequalification is warranted and emphasizes the need to make this determination early in the development of the project.

 

The proposed policy requires a number of competing factors to be weighed and balanced to determine if prequalification is warranted.  These factors are project cost, project complexity, project budget and time constraints, the number of potential contactors bidding on the project, the quality of the contractors potentially bidding on the project, and economic conditions.  When prequalification is being considered for a series of future projects involving similar work, the proposed policy would require these factors to be analyzed in the context of all the projects, not just each individual project in the series.

 

The proposed policy provides that project cost is the primary consideration in determining whether prequalification is warranted.  It provides that there is a presumption that prequalification is warranted on all public works projects in which the engineer’s estimate is $10,000,000 or more.  For all such projects the proposed policy requires prequalification unless the other competing factors provide a compelling reason not to prequalify bidders.  Public Works has recommended the $10,000,000 threshold.

 

The proposed policy provides that prequalification is not required for any projects under $100,000 because they are not required to be bid under the City Charter.

 

For all other projects, the proposed policy provides that the greater the cost of the project the greater is the presumed benefit to be derived from prequalification.  The proposed policy states that great weight must be given to project cost in determining whether prequalification is warranted.

 

Finally, the proposed policy requires Public Works, in coordination with this Office, to develop a standardized prequalification questionnaire.  Consistent with State law requirements, it provides that the questionnaire must include a uniform and objective method of qualifying bidders.  The proposed policy requires the standardized questionnaire to address level of experience, quality and reliability of work, timeliness of past performance, the ability to obtain appropriate insurance and bonds, safety, labor and tax violations, compliance with wage, hours and other fair labor standards, and disqualification from bidding on other project.

 

3.                    Appeal Process

 

State law authorizes the use of prequalification.  It requires entities using prequalification to establish a procedure for bidders to dispute a “not qualified” determination.  The appeal process set forth in the proposed resolution would comply with this legal requirement.

 

Generally, the proposed appeal process requires a bidder disputing a “not qualified” determination to file a written notice of appeal.  Either the director of the department responsible for bidding the project, or the City Manager or City Manager’s designee would conduct an informal hearing.  At the informal hearing, the bidder would be allowed to present facts contesting the “not qualified” determination.  The hearing officer is required to issue a written decision after the hearing.  Significantly, the proposed appeal process provides that this informal hearing is the final determination of the issue.

 

CONCLUSION

 

We recommend that the City Council adopt the proposed resolution.

 

RICHARD DOYLE, City Attorney

 

By

GLENN D. SCHWARZBACH

Senior Deputy City Attorney

 

 

cc:       Del Borgsdorf

Katy Allen