Steamboat contractors protest base area bid

Native, Connell file opposition to Duckels’ $4.5 million contract

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Base area bids

Contractor Initial bid Final bid Change

Connell Resources $7,631,271 $7,253,762 - $377,509

Duckels Construction $7,637,296 $7,177,296 - $460,000

Native Excavating $7,198,668 $7,231,468 + $32,800

Source: City of Steamboat Springs

— Two local contractors have filed a protest of Duckels Con­­struction’s $4.5 million contract for work at the base of Steamboat Ski Area.

Native Excavating and Con­nell Resources filed the protest Tuesday. Both contractors were finalists for the project, which the Steamboat Springs City Council, acting as the Steamboat Springs Redevelopment Auth­ority, awarded to Duckels in a 5-1 vote April 6. The contract is for work this year to build part of a public promenade, daylight a section of Burgess Creek and complete associated work at the ski base.

Base area redevelopment co­­­ordinator Joe Kracum previously said this year’s work could start as soon as Monday. But the protest, in the wake of a city proposal process that raised questions about leaked bid prices, likely will push that date back.

Steamboat Springs City Ma­­­nager Jon Roberts said action on the protest is on the Tuesday agenda for the City Council, acting as the redevelopment authority. Roberts said City Council members have several options, including rejecting the bid protest and keeping the contract with Duckels; upholding the protest and referring the bids back to the selection committee; or upholding the protest, rejecting all the bids and rebidding the entire project.

Kracum said Thursday that he was working with project designers to assess how to realign the project in the event it is rebid, to give contractors a fair shot at bidding for a new project.

Kracum said “the basic layout” of the base area project would remain intact, but what pieces are done this year could change in a rebidding process.

Kracum said work possibly could begin in June if the project is rebid.

He said even after his 25 years of working on public projects, primarily across Colorado, a bid protest at this point in such a large project is a new experience for him.

“I’ve never been involved in anything like this,” Kracum said. “It’s disconcerting.”

Final offers

City Council President Cari Hermacinski voted against awar­ding the contract to Duckels last week because of “very substantial” differences in Duckels’ initial and final proposals, she said. Hermacinski said the rumors of leaked bid prices, and “even the appearance of corruption in the bid process,” could raise questions with the public.

It raised questions with Native Excavating, as well.

“There was kind of a long line of things that just weren’t right about this scenario for pricing,” Native owner Ed MacArthur said. “In the public venue, it’s very untypical to see this procedure go the way it went. We just don’t want to see this kind of pricing operation going on here.”

Connell construction manager Eric Marsh confirmed Connell’s participation in the protest but would not comment further.

“We’re not going to speak on that behalf until the City Council meeting” Tuesday, Marsh said.

All three finalists — Connell, Duckels and Native — went through a “best and final offer” process, in which finalists presented an initial bid and interviewed separately with the city’s selection committee March 18. After conducting the three interviews, the committee gave each finalist until 5 p.m. March 22, to submit a revised proposal.

The selection committee took proposals for the entire project, whi­ch would extend into 2011, with the understanding that only a 2010 contract would be awarded at this time and that funding might not be available for next year’s work.

Last week, Hermacinski said in Centennial Hall that her suspicions were raised because Duckels’ bid change was much greater than Native’s or Connell’s. But initial bid figures Roberts released Thursday show that Connell lowered its bid by nearly $380,000, a figure relatively close to Duckels’ $460,000 reduction in its final bid. Native raised its initial bid about $32,000 for its final offer.

Native’s final bid was about $7.23 million, Connell’s was about $7.25 million, and Duckels’ was about $7.18 million.

Fred Duckels and Derick Duc­­kles have said Duckels Cons­truction did not, in any way, lower its final bid because of knowledge of leaked initial bids.

Duckels Construction has conducted three years of previous work on base area redevelopment projects.

Comments

Scott Wedel 4 years, 4 months ago

The bid process failed to follow basic principles of a fair bidding process. First and foremost, it is a horrid idea to have confidential bids at any point in a bidding process unless it is the final bid. It is a horrible idea because that creates a situation in which one bidder gains an advantage if it can get an idea of how it's bid compares to others. It is extremely difficult for the redevelopment authority to be completely sure that no topic discussed with bidders didn't suggest something about some other bid.

There are all sorts of bidding schemes. It is a very active area of economics and game theory because there is huge benefits for having more efficient price discovery.

If the development authority wants a couple rounds of bidding starting off with a sealed bid then a auction process similar to that the FCC used to sell radio spectrum could be used. It requires participants to make better bids in each round and eliminates the worst bidder at each round. The bids are revealed after each rounds. It puts pressure on the bidders to submit their best early on to not be eliminated.

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addlip2U 4 years, 4 months ago

Yes there is.............. a winner:)!
Re-bid with a different process, criteria and clear brakedown of the bid. All bids must be delivered sealed with subs contractor bids sealed too. Open the bids with the selection committee held at confidence ( clearly, someone "leaked" the price in the previous process).

Compare the bids and have an open meeting with ALL CONTRACTORS TOGETHER to clarify the bids, ask and answer questions so that all contractors hear the question/answers at the same time.

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hivltge 4 years, 4 months ago

Sounds like sour grapes to me... They met with 3 contractors asked them all to come up with a best final bid and now two don't like the out come. Is there bid leaking? Sure happens every day! Is it right? Heck no, but that doesn't mean it happened here either. Why wasn't Duckels price just 10, 15 20, 25 thousand less why 83,000 less. seems a lot when if they knew the price they could just come in a little lower. look at the initial bids two were very close and the one was way low maybe some one leaked the prices to them first and that's why they were low? Come on, bidding sucks right now with the economy. I can't count the number of bids I have been low on just to lose it because someone all of the sudden came in with a lower price. So on the rebid should the two contractor's that aren't low should they protest also?? I hope if they rebid Duckels gets that one too, it would serve the others right. Until you fix the bidding procedures across America this will continue to happen. There was a meeting with all contractors and they were asked questions and given a time period to look at their bids. Who knows the bid amount that could leak them? Who was the one that leaked them? If the City doesn't know that how can they say Yes the bid was leaked... Rebid!

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Scott Wedel 4 years, 4 months ago

I don't think the bids were leaked per se, but I think that the overall concept of secrecy was breached when Duckels read in the paper that the redevelopment authority expected the final cost would be less than Duckels bid. That comment only makes sense if other contractors had submitted bids less than Duckels. Thus, even the publicly stated account of why Duckels changed their bid was because proper secrecy of the initial bids had been violated.

Bidding theory deals with two main concerns - not giving one bidder an advantage and preventing bidder collusion. The collusion does not need be a conspiracy, but failing to meet fair price. Such as if 4 of something being sold for which 4 bidders would want one of at $20 each. Once they realize that each bidder can get one they bid only $1 and the seller gets far less than fair price. And from the game theory point of view, if auctioneer had offered only 3 of the items then with 4 bidders they could have sold 3 for $20 each in the auction process and the losing bidder still would have be willing to buy the fourth at auction price of $20. So it is well recognized that the simple public auction method is often not the best because each participant's bid is informative and can change what others will bid. So secret bids are a viable means of getting towards good price because, in theory, if they want to win and believe that others want to win then they have submit their best price. If the auction is for something so complex that it is believed that bids need to be discussed in detail to get the best final deal (such as FCC radio spectrum) then the bidding scheme eliminates some of the bidders in the each round in order to be sure that they are proceeding with the people willing to make the best deal. And all secret bidding auction methods release the secret bids when the seller opens and learns of the bids.

The bidding method used by the redevelopment agency was uniquely bad and is not a recognizable variation of any auction scheme that I have ever seen. So when people lost because of a surprising bid then they have justifiable complaints.

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Scott Wedel 4 years, 4 months ago

And in this case, when Duckels read that the final expected cost was less than their bid, they learned two important things by being the high bid at that point. They learned that others had bid less than them. They learned a range in which the others had bid. All the other firms learned was that their bid was competitive because they were within the stated range. So even, at best, this bid process was unfair and poorly done.

And since the bids were kept secret but were known to the agency then just about any question could be evaluated as to what it suggests that others have committed to do at a better price. It is reasonable to suggest that the interview process, in general terms, would be talking about issues in an attempt to improve on the best bid, not the worst bids. That would be the agency's own best interests. Thus, it is not hard to argue that Duckels took the optimum strategy for the flawed process which was to bid high, learn that they were high, get a hint of about how much and then adjusted their bid

The bidding process used by the redevelopment agency simply cannot be defended as as a good or fair bidding process.

So yes the losing bidders have sour grapes. They got gamed by Duckels in the bidding process. Duckels may not have realized they were gaming a flawed process, but the flaws in the process gave an unintended advantage to Duckels because of Duckel's initial higher bid. Is Duckel's final bid a bad deal? No. The flawed process just ended up giving them a better shot at the winning bid that the other contractors.

This is relevant because this bidding was for a public agency paid by public taxes that is supposed to follow a fair and proper bidding procedure.

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Fred Duckels 4 years, 4 months ago

Bidding is a poker game and it would be foolish to tip ones hand in the preliminary round. Who knows how many had access to the numbers. There has been a charge of improporiety on our part but the bidder will not disclose the source. I could easily devalure anyone if I did not have to back it up. This accuser should be barred unless the accusations are validated. Under oath maybe the truth or motive can be ascertained. We intend to pursue this.

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Scott Wedel 4 years, 4 months ago

Well, that goes to show that the bid process was poorly designed if the winner bidder says "it would be foolish to tip ones hand in the preliminary round". And since the redevelopment agency told the public of the expected final cost then that basically tipped the hand of Native's first round bid. When the bid process starts off with a process that is flawed from a game theory perspective because of the extreme value their chosen bid process put upon secrecy then it becomes a complete disaster when the redevelopment agency essentially releases some of one bid's confidential info.

Nothing improper by Duckels. An example of how to screw up a bid process by the redevelopment agency.

Unless there is actual evidence of Duckels doing something improper then presumably the awarded bid should stand. Connell gained similar info as Duckels, but didn't bid lower than Duckels in the second round bid. Native could surmise that their bid range had been compromised by the redevelopment agency and thus the other bidders would adjust their bids so they had to adjust their bid.

City probably needs to regain public trust in the bidding process. Thus, they should investigate the bid process and answer how that bidding process was chosen, why they didn't realize that releasing the expected final bid range was a problem, whether there was any other leakage of confidential bid info, and come up with a vetted bidding process for next year.

And it would appear that Fred and Derick Duckels know how to play some serious poker.

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hivltge 4 years, 4 months ago

Scott I do agree with a lot of what you are saying and there is a difference in the private sector and public bidding. I think some changes do have to happen but unless evidence can be found I don't agree with taking away the project from Duckels. They are not the only ones that know how to play serious poker! As a subcontractor I see it happen all the time and have grown to never think I have a job until I am on the job working and that still doesn't mean we have it. There are many back room deals and rebids until you get the price you want. People are hungry and will cut throats with out batting an eye for work. Luckily we are getting a lot of repair work on those same jobs and working on jobs were those low last minute bidders went out of business. This could go on for quite awhile....

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