By Chuck Miller
In a progressively competitive water services market, public water and wastewater utilities depend on the effective procurement of the equipment required to meet environmental standards yet maintain optimal performance levels in customer service, safety, and operation and maintenance. Utilities have the tough challenge of balancing regulatory compliance with the necessity of remaining consumer conscious.
Municipal procurement procedures — a complex process involving policy makers, municipal purchasing staff, utility supervisors, legal advisors, consulting engineers, equipment manufacturers and suppliers, contractors and ultimately customers — sometimes constricts utilities in carrying out key functions. If the goal is obtaining equipment that ensures the lowest total cost to the public entity and its consumers, then a review of existing procurement practices is critical.
Value is a word that often gets overused in buying and selling arenas and thus its true meaning is often de-valued. More than just meaning "better" or "lower" price, real value incorporates the total installed cost, which includes operating costs, durability of the equipment, and post-sale support.
"Smart asset management" — the fiscally responsible ownership and operation of equipment and technology — must begin in the procurement process in order to maximize the value of large equipment investments. Current procurement methods, however, can often be an impediment to the success of any utility project. For example, in bidding — a major aspect of the procurement process — contractors are not able to properly determine which equipment price should be included in their bid, particularly when the specification includes the ambiguous "or equal" phrase in the list of prominent features required.
Often contractors are at a disadvantage because of the lack of requisite time and information in the bidding phase, which can be frenzied especially as the bid closing time approaches. During this time the contractor is soliciting and receiving quotes from various equipment suppliers for project equipment. Because the contractor is usually selected on the lowest price, less consideration is given on the ability of individual equipment to meet the specification and instead given to the convenience of lower price. This leads to real problems in the future.
Suppliers of quality equipment have always believed that the owner (city/utility), and the owner's engineer, who designs the project, should be the ones to select the equipment. After all, they are responsible for the design and overall success of the project and have spent months evaluating processes and equipment. Decisions are based on a professional analysis and experience, not just a low price 15 minutes before bid time.
How can the engineer be sure he/she gets what is specified? The specifications must be clear and concise. Having ambiguities only causes confusion and problems. The equipment specifications should precisely detail the selected equipment, its construction and operating parameters. But ultimately, it's what's up front that counts. The bid form is the key to controlling what equipment is installed in a project. There are at least three good ways to structure the bid format to maintain control over the selection of equipment. They Are As Follows:
Pre-Purchase — The owner could pre-purchase selected equipment prior to bid by negotiating directly with the equipment supplier. The owner would then supply the equipment to the contractor for installation under the bid contract.
Sole Source SpecificationFor good reasons, such as the following, an engineer is justified in writing a sole source specification:
- To comply with the owner's standardization program.
- To optimize operation, maintenance and safety programs.
- Provide for interchangeability of costly equipment items.
- Reduce stocking levels for spare parts.
- Provide increased flexibility in use of similar or interchangeable equipment.
- Only one manufacturer provides equipment compatible with the engineer's design.
With this justification, equipment substitutions would not be considered, given incompatibility with the owner's standardization requirements. The contractor must prepare his bid on the basis of the named equipment and materials specified only.
Base Bid SpecificationThe bid form lists the name of the selected manufacturer, and the award of the contract is made on the base bid manufacturer's price. This allows contractors to operate on "an even playing field" and not take excessive or unreasonable risks in order to be the low bidder. Alternates can be evaluated — if desired — after the award. Awarding the job with alternates creates confusion for the contractors and can create disputes.
There are several ways to handle the technical evaluation of alternates. One is to do it prior to bid. Some engineers prefer to do this, although they create excessive amounts of work for themselves. Equipment suppliers believe the preferable way is for the contractor to submit the information on alternative equipment with the bid so that the engineer has only the low bidder's alternate items to evaluate and, therefore, considers only the alternate items that he chooses to evaluate. This will save much work, effort and wasted time.
The base bid method is fair to all parties involved with the project, including the owner, contractor, consulting engineer, base bid manufacturers, as well as qualified alternate manufacturers. No unnecessary or unreasonable effort or work is required with this approach. Most importantly, control of the project is in the hands of the owner through the consulting engineer.
In summary, the three approaches discussed allow the owner and the engineer to select the equipment for their project. This will result in more cost-effective, better designed, better constructed and better operating installations at public utilities — thus long-term value that is ultimately passed onto the consumer. Remember that it's what's up front that counts. WW/
About the Author: A member of WWEMA, Chuck Miller is Vice President for the Municipal Products & Systems Division of Smith & Loveless Inc., Lenexa, KS.
