City often passes on lowest bids

Nearly every month, Augusta commissioners vote to buy equipment and contract for services, usually without questioning why. It's an omission costing taxpayers big bucks.

The Augusta Chronicle looked at dozens of contracts from 2006 and 2007, finding 23 in which the lowest bidder was rejected.

The extra cost to taxpayers: $2 million, almost enough to give sheriff's officers the raises the sheriff requested to keep trained officers from leaving.

That total does not include the potential savings or expenses incurred from five contracts in which only one bid was obtained. It also doesn't include the cost of defending a minority procurement system that city officers knew had serious legal problems.

The Chronicle 's investigation began last year, building on the work of attorney Robert A. Mullins on behalf of various disgruntled taxpayers. Several lawsuits have been filed, one of which the newspaper joined in its efforts to review public documents of bids and purchases made through the city's Procurement Department.

The spotlight on the Procurement Department started with Hiram Thompson, who co-owns Thompson Building Wrecking Co., with his brother, Glen. They sued over a contract to tear down an abandoned building on Telfair Street, and a judge ruled their failure to include the proper bond documentation was a technicality commissioners could overlook.

Most of the commissioners didn't, however. They voted to give the contract to J&B Construction.

Taxpayers paid $328,258 extra for J&B to do the site-clearing work for the future downtown library instead of Thompson, according to the city's Finance Department records.

This case wasn't the only incident where the city ignored lower estimates because of technical errors in the bid process.

Another of the contract files The Chronicle reviewed was for scientific testing at the Highland Avenue water plant. Because the lowest bidder sent the Procurement Department only six copies of his proposal instead of the required seven, that bid was thrown out. The contract approved cost taxpayers $119,130 more.

Commissioner Joe Bowles said he was surprised to hear about that. Commissioners do have the bid and price information when they vote on purchasing recommendations, but they don't get price information about bids deemed "noncompliant."

"I think we should overlook something that was probably a clerical error," said Mr. Bowles, a certified accountant. "To save the county nearly $120,000 -- I think we owe the taxpayers."

Mr. Bowles couldn't recall a purchasing recommendation that commissioners rejected, explaining that they trust the people making the recommendations to do their best to get the right goods or services at the best price.

The rejected bid for the Highland Avenue contract was made by a local company, CSRA Testing. The company awarded the contract for $241,130 was MC Squared, a Marietta, Ga., company and a registered Disadvantaged Business Enterprise company owned by a woman.

The city's Disadvantaged Business Enterprise program caused a federal court battle. The Thompson brothers and three other business owners sued the city, alleging the program was unconstitutional. A federal judge agreed in March, ruling that the city couldn't justify a program that gave preference to businesses owned by minorities based on a disparity study that was more than 12 years old.

The city spent thousands of dollars defending the program, which commissioners knew was in legal jeopardy.

In June 2006, they learned the program could be successfully challenged because the disparity study was old. The commission approved a motion 10-0 to start the process of getting a new disparity study.

In July 2006, Mr. Bowles asked whether the city was at risk for a lawsuit for continuing to use the old program measures without a new study. The city attorney said yes, according to minutes posted on the city's Web site.

When Thompson filed a federal lawsuit months later, commissioners opted to pay the attorneys to defend the program instead of settling immediately.

The city was forced to settle when the judge ruled that the program was unconstitutional. The legal defense cost taxpayers $174,000, not counting the city attorney's fees.

A study in question

In April, the city's procurement office opened bids for a new comprehensive disparity study. On qualifications, the two highest-scoring companies were MGT of America, asking for $411,125, and NERA Economic Consulting, asking for $586,265. The bid by NERA, which was $175,140 higher, was chosen.

The study bids were reviewed by a committee made up of city purchasing employees, Small Business Committee members, Mr. Shepard and Tom Beck, who volunteered. MGT and NERA both have extensive experience in such work, and both have been successful in building studies that withstood legal challenges. Neither company is local, nor in Georgia.

According to notes of the committee's May 31 meeting, at least two members spoke highly of MGT, the low bidder. But another said she would feel more comfortable with NERA and thought their response would be quicker. Two complained that MGT would take too long and require the procurement staff to do most of the work.

Neither is true, however.

MGT's timeline was shorter than NERA's, and MGT would collect certain data that NERA requires the city to gather, according to procurement documents.

In the recommendation, commissioners were told the "decision was based on the qualifications of the firm and not the lowest competitive price of the project."

There are legitimate reasons to reject the lowest bidder, said Bill Woods, a director of the U.S. Government Accounting Office's acquisition team. There's quality, past performance or special features, to name a few, but such reasons must be detailed and explained, Mr. Woods said.

The Augusta Engineering Department gave a detailed reason for rejecting the low bidder for a drainage improvement contract. Department Director Abie L. Lason told commissioners in a June 5 meeting that he couldn't tell whether the lowest bid included fencing, that the bidder had no prior experience with similar projects and that the cost estimate was questionably low.

Hiram Thompson, whose lawsuit prompted the new disparity study, was appalled to learn that commissioners usually don't have all of the price information before voting on contracts.

"Whatever is collected in the front door (in taxes) is being thrown away through the back door with the Procurement Department," Mr. Thompson said.

In 2002, the Richmond County special grand jury issued a scathing report about the Procurement Department. It called for a performance audit of the department and a new department head. City commissioners cried foul, and then-City Administrator George Kolb complained that the jury's presentment was an unwarranted personal attack on Geri Sams, the department's director.

Nearly six years later, however, The Chronicle 's investigation revealed that many of the same problems still exist. Contracts for the city's new library provide several examples.

Work needed to assess the amount of potential hazardous materials at the site before demolition began, such as asbestos, cost the city $86,900 in 2005. A local firm had bid $17,500 for the job.

The project was rebid after concerns were raised about the initial project requirements. The local company didn't resubmit the bid because it was the one who had raised the concerns with the Procurement Department and dealt with those issues in its initial bid, the owner said.

Last year, a company picked to deal with underground gas tanks left on one portion of the library site cost taxpayers $85,608. A second company bid $64,157. A selection committee chose Cosby Everett & Wright for reasons that aren't included in public documents.

City comparisons

Because The Chronicle joined an Open Records lawsuit against the city, Ms. Sams declined to talk to the newspaper. City Administrator Fred Russell said city attorneys recommended he not speak about the Procurement Department while the lawsuit was pending.

The Chronicle joined the suit after formal requests made under the state's Open Records Act were met with such responses as: "It will be approximately one week before I can assign this task," which Ms. Sams wrote in response to a request to look at five contract files. She also attached a $143.65 price tag for having an assistant pull the files off a shelf and watch a reporter look through them.

Purchasing officials in similar-size Georgia cities operate their departments differently.

To save Savannah money, Peggy Joyner said, she can waive formalities most of the time as long as it is not changing a price and it isn't a major project.

If she finds her office forced into the position of rejecting the lowest bidder, she can reject all of the bids and rebid the project. Why, she asks, would she accept the next lowest bidder if it meant Savannah taxpayers would spend an extra $30,000?

In at least two contracts reviewed by The Chronicle , cheaper equipment was rejected because their products didn't match written specifications. For example, a piece of equipment was 5 feet instead of 7, or the rotation was 45 degrees instead of 60 degrees.

When a Savannah city department requests an item with written specifications that limits the number of potential bidders, purchasing employees will research products to try to find similar ones, Ms. Joyner said.

"That's our job," she said.

In Augusta, The Chronicle noted complaints from potential bidders about specifications that were so narrowly drawn as to eliminate competition. A number of contract bidders were rejected because they offered options for too many of the specifications.

For example, commissioners voted in December to accept the recommendation to hire Neilsen Building Systems to build a fire department training tower for nearly $1.32 million.

There was another bidder, but the loser had "numerous exceptions to the construction design and materials ... leaves some doubt in our mind as to hidden cost and the final cost of their bid." Its bid was $620,172 less than the winner's.

No competition

Several other contracts the newspaper reviewed had only one bidder. The contract to fix the roof and windows on the municipal building is one example.

Many companies attending a pre-bid conference last spring expressed interest in the project, but only one submitted a bid: Midwest Maintenance, for $2.27 million.

According to city documents, the bid was recommended because the repairs were urgently needed.

When other companies were asked afterward why they didn't bid, one of the reasons cited was that they didn't believe they could compete because the contract had a provision that gave preferences to Augusta-based firms.

Midwest, however, is based in Ohio and its local office isn't in Augusta. It's in Columbia County.

Scott Callan, who runs Gwinnett County's Purchasing Department, said his office has a policy to deal with single bids.

His county will postpone the bid opening for three days if it gets only one offer. His staff then contacts those who could have submitted bids to find out why they passed. If the county could get a better price, he can put the project out to bid again, Mr. Callan said. He tries to ensure every contract has at least five bidders.

In one case, Augusta's Procurement Department put out for bid again a contract that only had one offer, but it wasn't to get more competition. The bid on park pavilions was rejected because the company didn't submit the pricing in the proper format.

The project still got only one bid, from a different company, which charged $3,325 more.

The purchasing departments in Savannah and Gwinnett County ensure they have competition for contracts by maintaining a list of all potential bidders and alerting them whenever a bid comes up that they might be interested in.

In response to requests to see Augusta's list of vendors, Ms. Sams responded in court documents that no such list exists. However, she cites the creation of a vendor list as an accomplishment in her 2005 employee evaluation.

Government purchasing must be done by the regulations, in the open, transparently, fairly and without any favoritism, said Mr. Woods, the Government Accounting Office official.

Being a good shopper is part of the process, but being fair is also an element of governmental purchasing, he said.

In court documents, Ms. Sams denied allegations that certain bids have been awarded unfairly. Her department works diligently to ensure all purchasing is done lawfully and by the established rules, she contends.

The Thompson demolition company has done business with the city for at least 35 years, Hiram Thompson said. Never, until he bid on the job of tearing down the old Telfair Street candy factory, had he felt cheated in those dealings.

"If I'm not the low bidder, then that's fine. I just look to the next job," Mr. Thompson said. "But when you have one taken from you, that's a whole different story. I don't want to be treated any way but fairly."

Reach Sandy Hodson at (706) 823-3226 or sandy.hodson@augustachronicle.com.

IT ALL ADDS UP

The Augusta Chronicle looked at dozens of contracts from 2006 and 2007, finding 23 in which the lowest bidder was rejected.

ProductChosenRejectedDifference
Disparity study$586,265$411,125$175,140
Firefighters suits$32,043$27,500$4,543
Toner cartridges$54,939$47,782$7,157
Bulldozers$473,413$450,000$23,413
Candy factory demolition$771,150$442,892$328,258
Candy factory inspection$86,900$17,500$69,400
Shelving$64,000$52,000$12,000
Work stations$153,258$148,742$4,516
Excavator$71,725$51,245$20,480
Pavilions$105,725$102,400$3,325
Bus cleaning$46,988$10,102$36,886
Correction Institute uniforms$29,825$28,362$1,463
Newsletter and promotions$68,012$48,523$19,489
Airport fencing$67,466$62,437$5,029
Airport runway$815,095$627,012$188,083
Highland Avenue water plant testing$241,130$122,000$119,130
Steel valves$409,000$125,622$283,378
Floating mixer$474,208$459,205$15,003
Wireless consultant$86,572$49,500$37,072
Environmental services at library site$153,465$139,624$13,841
Gas tank removal at library site$85,608$66,937$18,671
Bucket truck$87,088$80,794$6,294
Fire training tower$1,315,461$620,172$695,289
Total: $2,087,860

SINGLE-BID CONTRACTS:

- Turner Associates, architects for new judicial center, $4.45 million in 2003, $4.5 million in 2006

- Municipal building roof and windows replacement, $2.27 million

- Mobile computers for patrol cars, $150,000

- Park pavilions, $105,725

- Playground equipment, $68,967

Source: City procurement records.

THE BOTTOM LINE

COSTING TAXPAYERS: If the city had taken the lowest contract bid for suiting up its firefighters, it could have saved taxpayers $4,543. Twenty-two other contracts in 2006 and 2007 were not awarded to the lowest bidders, costing taxpayers an additional $2 million.

COSTING BUSINESSES: The last time a business owner complained publicly about a bid process was in 2005. One business owner interviewed by a special grand jury in 2002 said he was dropped from a notification list not long after criticizing the purchasing department for accepting the highest bids for fire department equipment.