Bidding adieu to industry pricing norms

How an upstart engineering company is underbidding the seasoned competition

Although public procurements typically favour the lowest offered price, heads nevertheless turned when Ottawa-based HP Engineering Inc.’s bid came in 66 per cent lower than the average bid price for the design work to replace a bridge in a rural township southeast of the capital.

The local engineering company, which launched last year, is made up of industry veterans including former Genivar employees. It submitted an offer of $23,350 – remarkably low when compared to the average bid of $69,314 from eight other contenders – to design a replacement structure for the existing Kraft Road Bridge in South Glengarry. The bid was also 24 per cent less than the next lowest bidder, G.D. Jewell Engineering Inc.

South Glengarry Mayor Ian McLeod, who stepped aside from the selection process because of a conflict of interest (he works for Genivar, which supplied one of the bids), said it was alarming to see such a low number.

“I’m very concerned simply because I know that business very well,” he said. “It’s way under for what the norm should be for that project.”

The municipality budgeted $96,000 for the design work, according to a staff report dated March 26.

After an investigation into previous work and references from the engineering company, council voted in favour of the lowest bid.

Other factors besides cost were considered in the selection, Mr. McLeod said, including qualifications, references and past projects. He added it would be a fair statement that council could have benefited from his engineering industry experience when choosing the contractor.

Steve Taylor, president of Bytown Engineering, which also submitted a bid for the project, said he feels the decision was unduly weighted towards cost.

“All I can say is that the municipality didn’t utilize a quality-based selection process,” he said. “My personal perspective is they probably didn’t get the best value.”

Mr. Taylor was asked by the municipality to give advice on HP Engineering’s submission and he voiced concerns about the short amount of time the company proposed it would take to complete the design work.

“When you go to choose a doctor, surgeon, accountant (or) lawyer, you typically look for different attributes than who is going to spend the least amount of time providing the service,” he said. “I think it’s very poor for the industry.”

Mr. Taylor said that although HP Engineering’s design work for the Kraft Road Bridge may remain on budget, it could perhaps incur future expenses for problems that could arise during construction.

Council went against his recommendation and HP Engineering has begun preparing design options. This could include a complete bridge replacement, a shortening of the bridge or rehabilitation.

The co-founder of HP Engineering sees nothing wrong from his perspective.

“It’s not low from where we’re sitting,” said Tashi Dwivedi. “We’re not bidding on jobs to lose money. Maybe we’re more efficient than everybody else.”

PAST PROJECTS

Previous contract awards for HP Engineering include the Pembroke Street Bridge rehabilitation, the evaluation of the Westmeath Culvert structure in the Township of Whitewater Region, a rural municipality in the Ottawa Valley, and the Ormond Street Bridge replacement in Brockville.

One contract it didn’t win was the Kintail Bridge design project in Mississippi Mills, even though it submitted the lowest bid.

“Based on the low level of effort, particularly in the areas of structural review and detailed design, staff is concerned with the submission provided by HP Engineering, that this may cause cost overruns due to unforeseen issues incurred during construction,” read a July 3 staff report from technologist Cory Smith provided to the Town of Mississippi Mills.

The contract was awarded to the second-lowest bidder, Genivar.

HOW LOW CAN YOU GO?

In its request for proposals, South Glengarry included a stipulation that any bid 40 per cent below the average could be rejected. HP Engineering’s proposal crossed this threshold, becoming what Mr. McLeod referred to as a “rogue bid.”

“If they hadn’t had positive references … it likely would have been thrown out,” he said.

HP Engineering’s design work is scheduled to be complete by the end of the year.

The municipality’s goal is to have the bridge “shovel ready” in case infrastructure funding becomes available. Structural work done four years ago extended the life of the bridge, but time is running out and the municipality may be forced to complete the work out of its own pocket.

Mr. McLeod said he still has concerns about the design work, but noted HP Engineering will be updating council on its progress and will provide opportunities to ask questions.

As for whether the low bid will cause unforeseen costs in the future?

“Time will only tell,” he said.

 

Kraft Bridge engineering proposals for replacement

HP Engineering: $23,350

Jewell: $31,076

Keystone: $25,370 (for rehabilitation)

Bytown Engineering $63,300

McIntosh Perry: $63,500

Stantec: $66,888

Greer Galloway: $77,620

Genivar: $99,971; $70,647 (for rehabilitation)

Morrison Hershfield: $128,811; $28,108 (for rehabilitation)

 

The RFP asked bidders to provide design options and conduct a cost-benefit analysis to determine a preferred replacement design. Some companies included a bid for rehabilitation in addition to, or instead of, replacement.

 

BY COMPARISON...

Ontario’s Ministry of Transportation uses the following weighting to select a winning bidder:  

- 40 per cent for technical quality of proposal

- 50 per cent for past performance

- 10 per cent for price

Source: Ministry of Transportation