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Integrity of the process


frog2

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I work for a "prime? contractor with an approved purchasing system working for a government entity.

I am looking for a sanity check please.

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A RFP was issued for a lump sum turnkey design / build road construction project. The road is on the side of a hill. To design the road the contractor will have to obtain geotechnical data upon which to base its design. No geotechnical data was provided with the RFP. Exact location to place the road is contractor?s choice.

Bids come in much higher than the estimate. Two bids are close together but are a factor higher that the other bid.

Bidders were "prequalified". All three proposals are determined to be responsive, respobnsible, acceptable, etc.

An estimate was done but it was not an in depth "proper" estimate. There are technical people who thought that the estimate that was done is by a factor.

When asked for reasons that bids are so hiogh, they all indicate that contingency has been added because they have no way of knowing what is under ground. They say that if you let us do the geotechnical information and a 30 percent design, we can "do it cheaper" (another surprise).

Program Manager wants to revise the scope of work and request a revised proposal from the apparent low bidder, only. He now wants a price for a 30 % design, which would include them performing the geotech investigation, with the provision that we would negotiate the price for the construction, after receipt of the 30 % design. The total value of the award would still be their original lump sum price received for the original RFP

We procurement believe that this kind of modification represents a significant restructuring of the game and the cleanest and proper way to do is to let all three bidders play, or just award a contract to the original low bidder at their original price.

He disagrees and is adamant that going back to the one bidder does not compromise the integrity of the procurement. and he has the opportunity to save money. One stated concern is that there is a potential that one of the other companies could come in and low-ball the design 30% design and Buy the work. He also claims that he does not want to "exercise" the other two bidders.

Time and budget are issues.

This Program Manager is not taking "no" for an answer. He also believes that procurement works for him, and that this decision is his to make.

I thought I would solicit comments / suggestions from you Professionals out there.

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Frog are you, as the Contractor, soliciting subcontract proposals to perform the work? If so, what is your contract and pricing arrangement with the government? Task order?, CPAF, FFP, etc.? I am assuming that the project manager wants you(?) to award a subcontract for the proposed amount plus cost to perform geotech studies and prepare a concept design, then negotiate a final price within the original price.

I'm not sure about this, so I need Vern or someone else's input here. Can a prime contractor subcontract using what is referred to in commercial sector as a "guaranteed maximum price" (with an option to definitize to FFP if practicable)?

Or is the prime limited to subcontracting using only FAR specifically authorized contract types? The closest comparable method in FAR to a GMP is the "fixed-price incentive, successive target" acquisition method. We are using this method on various complex medical and headquarter faciliities. Wre start with a target price, then attempt to definitize to FFP during contract design development and construction. It has similariteis to but not the same as GMP, which is a better system, in my opinion.

The method that the government Project manager is referring to really should be done using FPI-ST if required to use a FAR method or better yet - as a GMP, with the intent to definitize to FFP, if the prime can subcontract using commercial pricing arrangement.

As to whether or not the Government can require you to only negotiate with the lowest proposer, I will leave that to others to answer. It isn't practical to have three firms devrelop a concept design and do the geotech work, but they could all three revise their proposals to include those costs. However, I'm not sure that would help the other two firms or provide any benefit to the government, unless the revised proposal includes some type of ceiling cost.

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The guaranteed maximum price method basically works like this -

The contractor guarantees to complete the scope of work within a maximum price ceiling. Payment is based upon actual, allowable costs plus a fixed fee, similar to a CPFF arrangement. If not definitized, there is usually a cost incentive arrangement whereby the parties share cost savings based upon a negotiated or owner established cost sharing ratio (e.g., 70/30 owner/contractor shares). If to be definitized to FFP, then the cost, possibly the fee arrangement, and possibly some incentive award fee arrangement are negotiated as the design progresses.

This is different than an FPI arrangement, whereby there is a target cost, "fee sharing" ratios for overruns or underruns, but generally not "cost share" savings. I believe that the "successive targets" arrangement allows the parties to adjust the target or to establish a FFP.

The GMP is a heck of a lot simpler arrangement and is familiar to design-builders.

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Guest Vern Edwards

The only contract type that a contractor cannot use is a cost-plus-a-percentage-of-cost contract, and then only if the prime contract includes the clause at FAR 52.244-2--unless, of course, the prime contract includes some non-standard prohibition that I don't know about.

frog2 writes as if he works for the government, instead of a contractor. (I assume that frog2 and the program manager are contractor employees and that the procurement is for a subcontract.) I don't see anything inherently wrong with what the program manager wants to do, unless there is more to the story than frog2 has told us. I don't know what procedural "integrity" is at stake, unless the program manager's procedure would violate the contractor's internal written policies.

The issue is more one of business sense than integrity. Can the contractor negotiate a reasonable price without getting revised bids from the others? If so, why bother with the others--the chance of getting a lower price? How much lower? It will cost a lot of time and money to get and evaluate revised bids from all three. That's the kind of procedure that the government would use. I don't blame the program manager for wanting to get on with things.

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Vern, thanks.

If that is the scenario, then I think that, for design-build, it is good to stick with an established system like GMP.

And if time is a serious issue, perhaps not bother with the other two higher priced firms, unless there would be some significant benefit in allowing all three to reconsider their prices.

Since the objective would be to save money if possible, the GMP with savings and with the owner's option to definitize to FFP within the GMP should work.

Above, I forgot that the geo-tech work and concept design should already be included within the overall proposed price, since that would be necessary, anyway. The sub might want additional money to cover the administrative costs to definitize to a FFP

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Gentlemen, I appreciate your jumping in on this and I apologize fort not getting back to the Board quicker.

I work for a prime contractor and we want to award a fixed lump sum design build subcontract. The design part will require them to do geo tech investigation to be able to do the design.

Right now, all three contractors are guessing about what?s under the hill and what kind of conditions they will encounter, and what it will really cost to do the job. Earthwork was roughly a third ? half of the total proposal totals.

My thoughts?

All three contractors are guessing about subsurface conditions, so which contractor is guessing correctly? Perhaps it is the high bidders. Who is to say how much contingency the high bidders included ? perhaps double the low bidder?

I thought that the revised RFP is significantly different from the original RFP so that no matter the original proposal prices, they all ought to get a shot at the revision. Integrity may not have been the correct word ? maybe equal treatment, level playing field, etc.

The bidders spent their time and money on the original proposal. The time and effort to put together a revised proposal should be minimal.

Ditto the evaluation of the revised proposals.

Again, I appreciate value and look forward to your input.

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Gentlemen, I appreciate your jumping in on this and I apologize fort not getting back to the Board quicker.

I work for a prime contractor and we want to award a fixed lump sum design build subcontract. The design part will require them to do geo tech investigation to be able to do the design.

Right now, all three contractors are guessing about what?s under the hill and what kind of conditions they will encounter, and what it will really cost to do the job. Earthwork was roughly a third ? half of the total proposal totals.

My thoughts?

All three contractors are guessing about subsurface conditions, so which contractor is guessing correctly? Perhaps it is the high bidders. Who is to say how much contingency the high bidders included ? perhaps double the low bidder?

I thought that the revised RFP is significantly different from the original RFP so that no matter the original proposal prices, they all ought to get a shot at the revision. Integrity may not have been the correct word ? maybe equal treatment, level playing field, etc.

The bidders spent their time and money on the original proposal. The time and effort to put together a revised proposal should be minimal.

Ditto the evaluation of the revised proposals.

Again, I appreciate value and look forward to your input.

Frog - why pay three firms to perform testing and develop a concept design? At this point, you could evaluate the pricing, find out how much contingency they all put into their numbers, select one and go the route that I suggested or that the PM suggested. Dont waste the taxpayers money on paying for three investigations and three concept designs.
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Frog - why pay three firms to perform testing and develop a concept design? At this point, you could evaluate the pricing, find out how much contingency they all put into their numbers, select one and go the route that I suggested or that the PM suggested. Dont waste the taxpayers money on paying for three investigations and three concept designs.
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My fault for not being clear. We would not ask the three to do the geotech.

In an attempt to lower the contractors potential risk and potentially our costs, we would be asking 1 or 3 firms, for a new lump sum GM proposal for for the turnkey job. We are not separating out the geotech.

The risk elimination part is the ability of the sucessful contractor to negortiate a price for the final design and construction, after that same sucessful contractor had completed the geotech and 30% design. The negotiated price could not exceed their lump sum GM turnkey price.

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