Virginia Graziani

The Redwood Times

Like the cavalry coming over the hill in an old Western movie, a last-minute call from a contractor saved the directors of Garberville Sanitary District from making a problematic decision at the GSD board’s October 13 special meeting.

Under a tight deadline, the GSD board met to award the contract for their wastewater treatment plant improvements project. GSD has received an American Recovery and Reinvestment Act (ARRA) grant of up to $2.9 million through the California Department of Public Health (DPH). Terms of the grant require that all bid award documents be received by DPH no later than October 15.

All board members were present, but board chairperson Herb Schwartz delayed calling the meeting to order until the arrival of the district’s engineer, Leonard Osborne of LACO Engineering. Osborne had told Schwartz he had information to give the board before they made their decision.

GSD General Manager Mark Bryant was unable to attend the meeting because of family commitments.

Jennie Short, GSD’s capital project coordinator, who was also absent, had prepared a memo summarizing the bids. Six qualified contractors bid on the project. Mercer-Fraser of Eureka came in with the low bid at $1,605,000, T & S Construction of Sacramento was the second lowest bidder at $1,911,800, and four other contractors submitted bids ranging from $2.1 to $2.7 million.

LACO Engineering had estimated total cost of the project at $2.4 million. As Short pointed out in her memo, the lowest bid was 25% lower than the engineers’ estimate, raising concerns that Mercer-Fraser’s bid was flawed. Other bids clustered around $2.1 million, which indicates the reasonable actual cost of the project, Osborne added. The low bid was still 15% below that estimate.

Some peculiarities of ARRA funding added to the board’s dilemma. First, although GSD was initially awarded up to $2.9 million, once the contractor is chosen, the grant is capped at the amount of the bid. Secondly, ARRA does not allow change orders, which means that if the project cannot be completed for the bid amount, no additional ARRA funds will be available regardless of the circumstances.

Both Osborne and the directors expressed dismay at the inflexibility of the grant. Osborne said he had never known of a large complex job that was completed without change orders. Schwartz quipped, “I’ve never known of a kitchen remodeling without change orders.”

Earlier in the day after looking at the bids, Osborne called Julian Zabel of Mercer-Fraser, who told him that they would like to take a second look at their bid. The contractor cannot change a bid once it is submitted, but under contract law, they have five days to withdraw it. Unfortunately, in this case, waiting five days would cause GSD to miss the state’s deadline of October 15, which would result in loss of the ARRA grant.

Although law requires the district to choose the lowest bidder, Osborne suggested that the board could deem Mercer-Fraser’s bid “non-responsive,” which would enable them to award the bid to the second lowest bidder, T & S Construction. Grounds for non-responsiveness would be the extreme discrepancy of the bid amount and Zabel’s concern, when speaking to Osborne, that Mercer-Fraser may have made an error in their bid.

Osborne said he had also explained the no change order terms to T & S, who said they were still willing to accept the contract at their bid amount of $1.9 million. Board members expressed their preference for local contractors, but because it is using public funds, GSD is required to choose the lowest qualified bidder.

At this point, Schwartz called Zabel at Mercer-Fraser and left a message stating that the board would like to confer with him that evening, if possible. Then the discussion continued, with board members raising questions about many aspects of the problem.

In response to a question from board member Dwight Knapp, Osborne stated that the actual cost of the project has no effect on customer rates because it is being paid for entirely by a grant. Increases are still needed to meet operations costs and other obligations, and to prove the district’s ability to pay debt incurred by improvements to the water treatment plant, which will be funded by an 80% loan, 20% grant package from the state department of health.

The board also talked about what happens if the contractor’s costs overrun the bid. The contractor could be required to forfeit his performance bond, but that would mean a lengthy dispute process.

Board member Bill Stewart added that if a problem is caused by errors in engineering, LACO would have to pay for the extra costs. Osborne reminded the board that the engineers base their design and specifications on information available at the time, and that once work begins, unforeseen conditions can emerge. For example, excavation might reveal different soil qualities than appeared on the surface.

Finally, at Osborne’s suggestion, the board began to craft a motion that would award the bid to Mercer-Fraser as the lowest bidder, unless Mercer-Fraser withdrew its bid by 10 a.m. the following day. In that case, GSD would award the bid to T & S.

Just as Schwartz was reading the draft motion to the board, Osborne received a call from Zabel at Mercer-Fraser, who stated they had found errors in their bid and wished to withdraw it.

With the decision-making process simplified, the board quickly voted on two motions, first to accept Mercer-Fraser’s withdrawal, and secondly to award the contract to T & S Construction of Sacramento.

The board then discussed how best to meet the document delivery deadline. Ultimately they passed a resolution authorizing Schwartz to sign the required documents in Bryant’s absence.