Local companies upset about construction rule changes

By Burton Speakman



A state bidding system changed after 134 years has some local building companies upset that public work has become a case of the “haves” versus the “have-nots.”

Ohio has changed its system for bidding on public projects, adding three new options and a host of controversy. Previously, Ohio had conducted all public projects using a multiple primary- bid system where each of the major components of a project was bid separately, and the low bid won.

There now are three new options: the first is a single- contractor low bid, which means that contractors bid to run the entire construction process, and the lowest bid is accepted.

But the two that are generating the most controversy are the construction manager at risk and design build options.

Construction manager at risk has the government entity choose a company that will oversee construction before the design process is complete. Therefore the price is based on cost plus a percentage of profit.

The system is similar for design build except the same company is hired to both design and oversee the construction of a project. Construction manager at risk and design build do not require acceptance of low bids. Bids can be accepted based on which company the public entity believes will do the best job based on submitted qualifications.

Mike Coates Jr. of Mike Coates Construction in Niles said the change will be “devastating” to small and mid sized construction companies.

The legislation changing the bidding process was placed into the state budget bill, and most legislators didn’t know what was in it or what impact it would have, Coates said. It was written by “large construction companies.” Small- and medium- sized companies now only get hired by larger companies overseeing the project to work a small portion of it, he said.

Rick Savors from the Ohio Facilities Construction Commission disagreed.

“This was not a provision that was written behind closed doors to benefit big business,” he said. Several state and industry people spoke to state legislators about the issue, Savors said.

Efforts to reform the state’s contract process started under former Gov. Ted Strickland, Savors said. Some entities, especially higher education, sought to add options for construction projects.

“These aren’t new ideas. They’re being used for construction in the private sector,” he said.

State Sen. Capri Cafaro of Liberty, D-32nd, said the changes may not have gotten enough scrutiny.

The state had planned a pilot program before changes were to occur, but the policy was changed before the pilot program ended, she said.

“This is something that could use additional review,” Cafaro said. “We don’t want to do anything that creates impediments for small business.”

Government entities can choose among the four options, including multiple- primary bid, Savors said. In addition most of the companies receiving contracts under the new system are small or mid sized.

Joe K. DeSalvo, from DeSalvo Construction in Hubbard, said his business has declined since the change and disputes that most businesses receiving contracts are small or mid-sized.

“They may not have a lot of employees, but they’re big companies,” he said. These companies subcontract most of their work, DeSalvo said.

Companies such as DeSalvo’s must either change their focus to being a subcontractor for specific work or focus exclusively on bidding on private work, he said.

“We make our living off being a general contractor,” DeSalvo said.

Fewer companies are trying to get surety bonds to serve as contractors for public jobs, said Al Miller, from Calvin Johnson and Co., which issues surety bonds for construction-contracting deals.

“The construction manager at risk and design build ideas make sense for the $100 million projects, but for the $5 million or $10 million projects they don’t make sense in my opinion,” Miller said.

Those doing the hiring don’t necessarily agree with that assessment.

The construction manager at risk, design build and single contractor systems are all simpler for government entities, said David Creamer, vice president of finance and business services at Miami University.

“We now have a lot fewer change orders and a lot fewer delays, which saves us money,” he said.

The state needs to offer multiple options. They should not be removed without evidence they cost more, said Bruce Johnson, president of the Inter-University Council of Ohio, which represents the state’s public university.

“We believe that all options should be available to provide a system that offers the lowest cost [for projects],” he said. “That’s what we believe we have now and what we believe we didn’t have before.”

DeSalvo, Coates and Miller all question how the new options can be cheaper when they don’t involve competitive bidding based on price.

“There is one project where we bid against one of those companies getting [construction manager at risk] bids and their bid was $5 million more,” Coates said.

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