Council Minutes
PROCEEDINGS OF THE CITY COUNCIL
OF THE CITY OF GRAND FORKS, NORTH DAKOTA
Friday, January 8, 1999
The city council of the city of Grand Forks, North Dakota met in special session in the council chambers in City Hall on Friday, January 8, 1999 at 12:00 noon with Mayor Owens presiding, pursuant to call by Mayor Owens, which was served on all members of the council on Thursday, January 7, 1999: Document No. 7658 - Notice.
Present at roll call were Council Members Brooks, Polovitz, Carpenter, Klave, Beyer, Babinchak, Bakken, Hafner - 8; absent: Council Members Lucke, Hamerlik, Bouley, Glassheim, Lunak, Martinson - 6.
REJECT BIDS ON BID PACKAGE NO. 7, FOR THE
CORPORATE CENTER
Tom Nonweiler, representing Mortenson’s, distributed summary of general construction bids for Bid Package No. 7, tenant improvement package for the Corporate Center project and work is primarily limited to the large building or 401 building with exception of shell work on the 402 building. He stated they took bids on the 16th and on Monday, January 4, they were notified by the low bidder, Construction Engineers, that one of their sub-contractors had incurred an error in their numbers. He stated they received four bids with low bid by Construction Engineers in the bid amount of $2,319.900 and have consulted with Mr. Swanson, city attorney, regarding the matter as they understand it as the bid error was in the calculation sheets and not noted on Construction Engineers bid form that they are required to honor their bid, and at this point prior to award and have verbally, bur not formally, heard from Construction Engineers that they would like to withdraw their bid. The options are at this point to allow Construction Engineers to withdraw their bid, make recommendation to award to Construction Engineers noting that they do have a hardship problem that they are going to have to deal with, which typically leads to a hardship problem through the course of construction, award to one of the other contractors or reject all the bids, rebid the project, which they understand would have to go through the minimum three week bid period and also that becomes a schedule hardship on the project.
Mr. Nonweiler reported that the sub-contractor was a local dry-wall subcontractor, the errors have been identified to be $78,500.00; they did take names of subcontractors and know that the second bidder also has named that contractor as his dry-wall subcontractor so it’s at least common to the first two.
Council Member Babinchak asked if it was possible if they have shown the documentation, that they just add the $78,500.00 onto Construction Engineers bid, as they are still low bidder. Mr. Nonweiler stated that in consulting with Mr. Swanson it would appear no because it isn’t identifiable on the bid form and they haven’t in fact received that kind of information from Construction Engineers, but as he understands it, it does have to be identified on the bid form.
Council Member Bakken asked if they could award the bid and do a change order to the bid later. Mr. Swanson stated he doesn’t believe there’s any provision in ND law for you to knowingly accept a bid that does not include all of the elements of the work to be completed under the pretext of accepting it as lowest and most responsible bid and then entering into direct negotiations with that bidder to include an omitted portion of the work. He stated that as a practical matter the council has three options: 1) reject all bids and go out for a rebid; 2) accept the lowest bid and require the lowest contractor to honor their bid, and that has a number of practical difficulties associated with it; or 3) accept the lowest responsible bid after your first bidder, in this case Construction Engineers.
Council Member Hafner stated the most prudent thing is to try to find a way to work with them, that if go to the next bidder it’s going to cost us another $221,000, and if look at third contractor, not at all happy. Mr. Swanson stated he was only reporting what the laws are and read from Code what their options are: “At the time and place specified in the notice, the governing body shall open publicly and read aloud all bids received, and thereafter, award the contract to the lowest and best bidder or reject all bids.” He stated that by statute they have those two options, and as he indicated council can determine that the lowest bid is not the most responsible; the only other issue that he thinks they potentially have an opportunity to save some time is on a rebid, the statutes require that you go once a week for three weeks, there is a provision that if you determine there is an emergency situation they can waive the bidding requirement. He stated he didn’t know if there was a possibility of an emergency existing here or not, generally speaking, the passage of time in and of itself doesn’t constitute an emergency, but that would be for the council to determine. Council Member Hafner questioned what three weeks would do to the project; Mr. Nonweiler reported it essentially puts the project three weeks behind the September 1 completion date.
John O’Leary, Urban Development, reported that one of the tenants involved with this is an accounting firm who’s very concerned about the timeframes, the three weeks plus whatever other time they need to review the bids to make sure they are in compliance, is a period longer than three weeks, and that puts them in a crunch with one of the demands of our tenants.
Mr. O’Leary reported that one of the issues he talked about with the needs of the tenants, if we don’t make the time frame limits won’t lose the tenants but will lose the ability of that tenant to move in at the time specified and they’ve indicated to us is that they would need to move their moving time back substantially so doesn’t interfere with what we’re talking about in terms of timeframe. He asked if it was possible to pick up on what Mr. Swanson indicated if this is an emergency situation or not. Mr. Swanson stated that the statute doesn’t define what an emergency is, and for the most part would be left to the council to determine whether an emergency situation exists. He stated they have one other factor that need to keep in mind and that portion of these funds are EDA funds, and EDA as he understands and will defer to Urban Development Office, is going to require an opinion from his office that the action that was undertaken is in compliance with State law, and that he cannot and will not issue an opinion that would allow council to negotiate that bid through a change order. He stated that if it is their intent to move forward without the excessive delay, only option he sees for council is to declare to find it to be an emergency and either negotiate with the bidders that you have or as discussed in a conference yesterday, do an accelerated bid situation in which you would limit your bid to those that submitted the bids before you and require them to resubmit revised bids on an accelerated time table. He stated the only way they can get away from the three weeks is if you find there’s an emergency and identify what that emergency might be.
Council Member Klave asked if there was any possibility with the four bidders that we can separate the sheetrocking part of bid and bid it as a package solely on its own and award the contract less that. Mr. Nonweiler stated that the sheetrock can be separated, however, it is in fact schedule critical as we are at the point where we need the interior framing to proceed, would be the wall systems (stud system and drywall is included in that package. He stated that the subcontractor that he referred to would be performing that work in its entirety.
Council Member Polovitz asked if declare an emergency on this situation, how quickly can it be rebid. Mr. Swanson stated if they declare an emergency you can determine whether going to rebid it or not and 2) if are going to rebid it, what that accelerated bid schedule is, thinks yesterday Mortenson’s and the architects were identifying perhaps a weeks time. It was noted that the balance of the contract is interior finishes and would range from the floorings, wall coverings, ceilings, painting, stonework, etc.
Council Member Carpenter asked if they find basis for declaring an emergency, they don’t have to rebid it but can negotiate with the four bidders they have. Mr. Swanson stated they could, and if the council were to do that, the stronger position for council to be in would be to declare an emergency, reject the bids you have here and direct an accelerated rebid.
Council Member Carpenter stated he thinks we have an emergency situation, have a project that has been pushed back at various times, have tenants anxious to get in and have dealt with cramped circumstances in various locations and need to move on, and if lose one of our tenants for a period of time (not permanently but for number of months) that will have impact upon our cash flow and ability to repay bonds and whole purpose of what doing is jeopardized; and moved that we declare an emergency situation based on that reasoning, that we reject all bids and request a modified bidding. The motion was seconded by Council Member Polovitz.
Mr. Swanson stated he didn’t know what the bidding schedule is but another option depending upon how meetings fall is may wish to delegate authority with power to act to the Urban Development Committee or if they have looked at bidding schedule and where it falls in relationship to Urban Development meetings or city council meetings. Mr. Nonweiler stated that the one week period they had discussed was based on taking bids the Friday before the next council meeting and presenting it to Urban Development before council on the 19th of this month, and Mr. Swanson stated they would not need to include that item in the motion.
A representative of Mortenson’s stated he would like to explore further Mr. Swanson’s recommendation with respect to declaring this an emergency situation; that they believe having contacted these general contractors and how they may react to this, that the high bidder probably will not respond again, not in his benefit, and would expect the low bidder would raise their bid somewhat to try to recoup the error and that the other two bidders would be shooting at the low bidder’s number; they don’t expect there will be any gain in this but expect that ultimately the City will pay some or all of that error portion to rebid it and would be about a weeks time to get those numbers back in. He stated that if the emergency would permit the council to give them authority to negotiate with low bidder, he would urge that they be given that authority as there are two aspects to that $78,500 problem, one is an error in that they didn’t carry their labor for a portion of the work from a worksheet to a summary sheet, and the other is a mathematical error, and problem is that it wasn’t on the bid form but did give contemporaneous take-off and worksheets that demonstrate that it was in fact a mathematical error and there very well may be room to negotiate with Construction Engineers and their dry-wall subcontractor that says maybe give part of this since it seems to be demonstrable legitimate error and council deal with the other, they get on time schedule and come out with a less expensive proposition than rebidding it even in the accelerated fashion.
Mr. Nonweiler reported that Construction Engineers has told him they will withdraw their bid, and that formally they have not been notified by the number 2 bidder. It was noted that they have not given the number 2 bidder the opportunity to say whether or not he’s going to accept it the way he bid it, and may have made same error but they still have the right to honor their bid. Mr. Nonweiler stated there is every possibility they would do that and there is some indication that they may elect to do that and the premium the City would pay would be about $295,000 over the low bid.
It was noted that the City has not awarded the bid and Construction Engineers have not issued formal request to withdraw their bid, however, they have come over with an armload of what they claim to be case law showing they can do that and not sacrifice their bid bond and indicated verbally that they would fight on that basis and would not take the job for the lower number and give up their bid bond.
A representative of Mortenson’s, stated that on fair treatment of the bidders, they’ve already been contacted by telephone by at least one other subcontractor who learned of this meeting today, extremely concerned and upset over the possibility of this going back out to rebid (glass company) as their number is on the street and their concern that this would put them at a disadvantage, and whichever decision is made, there will be some who are unhappy.
Mr. Swanson stated that the statute clearly provides for the council to determine emergency circumstance, there is no definition of emergency and no further guidance provided by statute as to what you do after you declare an emergency, and what he has done is attempted to do a little risk analysis as to who might challenge and what type of challenge could they bring in the short term and believed you reduce your exposure to challenge by allowing the four original bidders an opportunity to rebid, whether they will or not doesn’t know, and he can’t give any assurances of any kind that the reduction in risk is greater by doing that or how much greater it might be, that we’re out there in some gray area at this point. For you to attempt to do something without an emergency declaration can assure you quite readily that the likelihood of a challenge is extremely high. Mr. Swanson stated that this does not fit the definition of what the law calls a clerical error, a clerical error would be an error you can identify from the face sheet of the bid, and this was a bottom line bid in which there is nothing on the face of the bid sheet that you can look at and from that document alone determine an error exists, but for the contractor notifying the City, we never would have known there was an error, would have known there was a large spread in the bids but wouldn’t have known that was an error.
Mr. Swanson stated the motion was to declare an emergency, reject all submitted bids and are going to give a bid deadline with new bid documents to these four contractors, and they will have to timely submit their bids at that time.
Upon call for the question and upon roll call vote, the following voted “aye”: Council Member Polovitz, Carpenter, Klave, Beyer, Babinchak - 5; voting “nay”: Council Members Brooks, Bakken, Hafner - 3. Mayor Owens declared the motion carried.
Mr. Nonweiler asked them to define their emergency bid period, and asked if that were something they were going to need to publicly advertise and go through that part of the process again or has it been limited to the four responsive bidders that they are rejecting. Mr. Swanson stated his interpretation of the motion that was just passed is that you would not be publicly advertising but rather submitting appropriate bid documents to the four contractors being Construction Engineers, Sherlock Construction, Meineke Johnson and TF Powers. Mr. Nonweiler stated they would look at a week from today for bid opening and Urban Development Committee would consider at meeting on the 19th prior to council.
REFER MATTER OF BID PACKAGE NO. 7 TO
URBAN DEVELOPMENT COMMITTEE
It was moved by Council Member Babinchak and seconded by Council Member Hafner to refer the matter of Bid Package No. 7 for the Corporate Center to the Urban Development Committee. Carried 8 votes affirmative.
ADJOURN
It was moved by Council Member Beyer and seconded by Council Member Polovitz that we do now adjourn. Carried 8 votes affirmative.
Respectfully submitted,
Saroj Jerath
Deputy City Auditor
Approved:
__________________________
Patricia A. Owens, Mayor