Can You Explain How The Bidding Process Works For New Hospital Construction?Jul 26th, 2011 | By Submitted | Category: Editorials
By David Abercrombie, MCMH CEO
The process of selecting a general contractor to build the new hospital is somewhat long. First, the District board had to decide whether to use a Lump Sum bid process (the conventional method) or go with a Contractor at Risk (C@R) process. They chose the C@R process because it guarantees a maximum price (GMP). If the project goes over the GMP the contractor “eats” the difference. But really the C@R method of construction has several advantages.
With the conventional Lump Sum approach, the contractor is selected based on low price bid. There is no open book budget and if there is any savings it goes to the contractor, not the owner. In my way of thinking, this can encourage a company to cut corners with quality. Another disadvantage of the Lump Sum Approach is that the owner has no control over subcontractor qualifications; nor does the owner have the ability to fast track the project.
With the C@R process, the Hospital District board selects the contractor based on qualifications and a negotiated fee. There is also the advantage of open book accounting. There is the ability to pre-purchase building supplies and services so if there is a saving on the project it is returned to the owner. There is also much greater owner input into the construction schedule.
The USDA approved using the C@R construction method on March 3, 2011, pending their approval of a selection process based on free and open competition and agreement by the USDA in the actual selection of the contractor.
The District sent out a Request for Proposals (RFP) to find construction companies interested in building the new hospital. Seven major general contracting firms from around the state responded. They were from Tallahassee and surrounding area, Gainesville, Orlando and Jacksonville. The companies submitted very detailed proposals. There were nine key parts to each proposal. An example of a key part is: how the contractor intends to advertise for, qualify, and use subcontractors.
A meeting was then set up with the USDA at their Lake City office to discuss the qualification of the contracting firms who submitted proposals, and to go over the process that would be used to select the contractor. The USDA brought in the head of their architectural office from Gainesville, as well as their regional director, to go over the materials and participate in the discussion. The USDA approved all the companies who submitted proposals. The head USDA architect told hospital representatives that the process was proceeding exactly right.
The District board then spent about 10 days reading the seven proposals. A selection grid was developed to score each key part of each proposal. On May 17, a quorum of board members met in an open meeting and participated in the scoring. The key parts of each proposal were given a number from lowest to highest. Each Board member scored all nine key parts included in all seven different proposals. These scores were counted and the contractor with the highest number of points was put at the top of the list. The contractor with the second highest number was put at number two, and so on.
The Board decided to interview those companies with the four highest scores. The four companies were (in alphabetical order) Ajax, Batson-Cook, Childers/Culpepper and Robbins & Morton.
Representatives from each of these four companies were asked to attend a face-to-face interview to defend their proposals. Another scoring grid was developed. A quorum of district board members participated in the open interview on June 6th and once again gave numeric scores, this time based on the key parts of their proposal defense.
The two total scores (from the proposal and from the interview) were added together to get a total score for each company. The four companies were listed from the highest total score to the lowest total score. The interview questions and other materials and documents were then hand-carried (for the purpose of speed) to the USDA in Lake City for their review.
On July 6, the USDA sent the Hospital District a letter stating that “…the USDA/RD concurs that the selected CM [construction management] firm is qualified for the job and the hospital has gone through the appropriate process and proper due diligence for the selection as required by RD [Rural Development] instructions.” The District immediately began negotiations with the high scoring company, Culpepper/Childers of Tallahassee. Culpepper/Childress is a joint venture between two big and stable companies with 80 and 47 years’ building experience respectively. Their projects encompass nearly 80 healthcare projects, including work for Tallahassee Memorial Healthcare System, Capital Regional Medical Center, and Archbold Memorial Hospital.
The negotiations with Culpepper/Childress are not yet complete, but are expected to be completed this week. Should negotiations not be successful, then negotiations will begin with the contracting company with the second highest total points scored. As you see, the process is a highly weighted process performed at arms-length with the oversight of the USDA. It’s a good process and I think the Board has selected an excellent company to build your new hospital.