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Timeline explained to city

Silver State Post of Deer Lodge, Montana

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As representatives for USDA Rural Development and engineering firm Morrison-Maierle met with the public works committee last Tuesday to discuss the timeline for the bid process for the new wastewater treatment plant, one question drew some concern — what if the bids come in significantly higher than the engineers' estimate?

"There are council members that feel the overages are going to be close to six or seven figures. So what do we do then?" asked committeeman Brian Bender.

"Wow, I don't know what you do then," said Karen Sanchez of Rural Development in reaction.

She had been speaking to the committee about an overage in the range of $50,000 and how certain parts of the project could be removed from the scope of the project, but the possibility of bids coming in that high above the engineers' estimate caught her off guard.

"We need an answer to that question because that is what we're going to hear," said Bender.

"Plus the fact that the last estimate we're working on is almost a year old," chimed in engineer Allen Erickson of Morrison-Maierle.

Sanchez read off the options the city has if the bids are that much higher as per the lending guidelines from Rural Development. While some did not apply, others, such as obtaining additional funding were not met with optimism.

"It's not likely. I mean that is an option, but it's not a likely solution either for you or for us," said Dan Johnson of Rural Development, "politically for you guys I don't think that's possible and the feasibility for us is not likely."

However, there are some options the city could look at should the bids come in higher than expected.

On Oct. 27, the city's public works committee met with Rural Development and Morrison-Maierle to discuss the process of selecting a bid for building the wastewater treatment plant. Rural Development is the major funding agency for the project and is contributing $6 million worth of grants and nearly $10 million worth of loans.

The original estimated cost of the treatment plant portion of the project was $7.1 million six years ago, but with additional aspects needed in the design as well as the increased cost of materials and construction since then, the engineers estimated in December the cost of the treatment plant will be closer to $11.4 million. Recently the city council approved a rate increase to fund the additional loans they will need to cover the increase cost estimate. The total estimated cost of the entire wastewater improvements project, including the phase one portion of sliplining, is estimated to be $17,284 million.

Sanchez said that in addition to sending the city the information produced by Rural Development explaining how the bid acceptance process should go, she wanted to bring up some of the important points to the committee. She said the process includes three main components — advertising for bids, bid opening and post bid procedures.

"The main idea, from us as a funding agency, is to make sure that you have competitive bids so you get the best price," said Sanchez.

Johnson said when bids are received, they should not be opened until the appointed time and day. Erickson said that so far there have been about five to seven prime contractors which have responded so far to the bid advertisement.

"You've got the main, big contractors very interested and that's good," said Sanchez.

She also explained that to make sure all the bidders receive the same information, any inquiries about the project should be directed to the engineers. Additionally, she said that by doing such, the engineers can find out if there are any aspects that they need to clarify for the bidders. Erickson said the firm is keeping track of the inquiries they have received.

Sanchez further told the city that they should avoid any potential conflicts of interest and outlined how relations or associations between the city and the construction companies could invalidate a bid or lead to additional issues.

"It just keeps the city out of trouble," she said.

Sanchez continued on that as the construction period is long, stretching 420 days, there will very likely be change orders during it, some which will need to be executed quickly so as not to delay construction. She recommended that the city designate an individual such as the mayor to have authority to act on those change orders or that the public works committee meet more often.

Bender voiced the idea that perhaps change orders could be approved by a committee up to a certain dollar amount before they would need to be approved by the council and also suggested a special committee be formed with members from the different committees of the city.

"Some of these things become fairly time critical," said Johnson.

Erickson added that from the engineers' standpoint, they will try to advise the city as early as possible of any changes in order to the project.

Sanchez also brought up about how the bids will be opened. She said that the city should be exact as to opening the bids on the appointed day at the appointed time and the engineers will be opening the bids.

From that point, the engineers will look at the bids in detail and compile tabulations of the different bid amounts and break them down by different aspects of the project. Sanchez said the engineers will also look if there are any major or minor reasons for rejection and if minor ones are found, they will contact the bidder to notify them that they are missing something or need to change something.

Erickson said Morrison-Maierle will also review the companies to make sure they have the experience to do the project as well as the means to complete it. Sanchez said the engineers will also contact bidders that might have an anomaly in the price of their bid to see if there is a mistake or if they caught something that was missed in the design.

Once the numbers have been compiled the lowest three bids will be looked at by the city and once a bid is chosen from those, the bonds sent in from the companies will be returned. Sanchez said that Rural Development will review the engineer's tabulations and will also need to approve the bid selection and signing of the contract.

As for the possibility of bids coming in slightly higher than the engineers' estimate, Sanchez said that part of the project's budget includes a contingency fund. She said that the city could use some of those funds to compensate for the gap, but said that they couldn't use it all as the contingency fund will be needed for change orders in the project.

As for the options available should the bids come in significantly higher than estimated, Sanchez and Johnson said that there are two possibilities. One of those would be reducing the different components of the project. Sanchez explained that the base project will be bid upon by the contractors as well as additional parts. Some additional parts of the project could be removed if the bids are too high.

The other possible option would be redesigning the project and re-bidding it.

"It's my belief it's been designed as simply as it could be," said Sanchez.

"There are a couple options at least worth considering," said Johnson.

Sanchez also noted that if some of the budget items in the project are less than anticipated, the city may be able to fund the project even if the bid surpasses the engineers' estimate.

Committeeman Bob Stone complimented Rural Development and Erickson for their work and said that it is important the entities have clear communication. The others agreed.

"We'll definitely do our best. The big thing is maintaining that communication," said Erickson.



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Original Publication Date: November 4, 2015



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