February 5, 2012

Wichita city manager proposes eliminating no-bid construction projects

The days of awarding construction projects without taking competitive bids might be numbered at City Hall if City Manager Robert Layton has his way, especially with public projects such as parking garages that are part of private commercial development.

The days of awarding construction projects without taking competitive bids might be numbered at City Hall if City Manager Robert Layton has his way, especially with public projects such as parking garages that are part of private commercial development.

Layton said last week that he intends to ask the City Council for a policy change against those no-bid contracts. The contracts became an issue after council members Michael O’Donnell and Pete Meitzner forced the city to take bids on the city-financed 300-stall parking garage adjacent to the privately financed Ambassador Hotel Wichita at Douglas and Broadway. Bids for the garage came in almost $1.3 million under some project estimates, the first publicly financed downtown parking garage in almost 20 years to come in under budget, according to figures from the city’s office of urban development.

“It’s just good public policy,” Layton said. “There are certainly two schools of thought about this, one being that the private sector can bring in a project cheaper than the public sector. We’re more difficult to deal with, resulting in an increase in costs, things like that.

“But I don’t know of any empirical evidence to support that, and there’s certainly some concern out there that the taxpayer isn’t benefitting in these instances from the bid process. And it’s so commonplace in everything else we do.”

The city has financed parking garages to serve Old Town, Gander Mountain and WaterWalk Place.

Layton’s stance is endorsed by Associated General Contractors of Kansas, whose executive vice president, Mike Gibson — a former city council member in Louisiana — said he was surprised that the policy change didn’t originate with council members or Mayor Carl Brewer. The no-bid approach threatens the public’s faith in future public-private partnerships in Wichita, Gibson said.

“If public dollars are involved, competitive bids are the only way to go to protect the integrity of the process and the integrity of the taxpayer,” Gibson said. “For the most part, they are the only way elected officials can assure the people who elected them that they’re getting the most bang for their buck.”

No-bid history

Wichita’s no-bid process dates back to the mid-1990s, according to Allen Bell, the city’s urban development director.

In the mid-1990s, as the city was trying to get the Hyatt Regency hotel built, it passed a charter ordinance allowing developers to choose contractors for public-private partnership projects. This allows developers who have entered into development agreements with the city to choose their general contractors without going through the city’s formal bid process. There are no procedures prescribed by the charter ordinance for the selection of contractors by developers; however, they are required to provide adequate surety bonds to guarantee completion of the project and payment of subcontractors. In these instances, the City Council must approve the development agreement by a simple ordinance passed by a two-thirds majority vote.

The Ambassador garage at Douglas Place, awarded at $4.73 million to Key Construction — a partner in the hotel project and the project’s contractor — came in about 20 percent under estimates provided the City Council, on the heels of some city-financed downtown parking garages that spiraled well over budget.

The most recent, the 2008 WaterWalk Place garage built by Key Construction, an original partner in the WaterWalk project, came in $1.5 million over budget at almost $8.5 million. That’s the biggest parking garage miss, according to figures from the city’s office of urban development, although the 2004 Old Town Cinema garage built by Key Construction came in almost $1 million over budget at $5.225 million.

A ‘crucial’ element

Dave Wells, president of Key Construction and a partner in the Ambassador hotel project, said his bid on the Ambassador garage came in under budget — under “an amount not to exceed” — for a variety of reasons, including lower building material costs and economies of scale with the work he’s performing on the hotel, including project supervision, construction management, quality control and subcontractor access.

Wells said there’s little comparison between his Ambassador bid and the results of other Key parking garage work downtown.

“It was a whole different time back then,” he said. “Materials costs were really high back then.”

Two City Council members who spoke to The Eagle applauded Layton’s decision to seek the policy change.

“I knew something didn’t look good the moment I opened that packet and saw there was a no-bid contract being awarded,” O’Donnell said. “No-bid contracts are bad government. We don’t do that in our personal lives, going with our buddies selling us cars no matter what he charges us. We’re talking millions of dollars here.”

Meitzner agreed.

“To me, it depends on evaluating the merits of a specific project, but generally speaking, if there’s public use of the garage and use of taxpayer dollars to build, I prefer the public bid route,” Meitzner said.

Several other council members did not respond to requests for comment. One, Janet Miller, was out of the office last week after the death of her mother.

Layton’s proposed policy change also was applauded by some of the city’s contractors.

“I don’t think that the public component of a project should just be handed to a development team, particularly when one of the general partners in the development team is a contractor,” said Mike Grier, president of Wichita-based Eby Construction.

Some contractors say no-bid contracts can drive up project costs unnecessarily, through the duplication of administrative and project management services and the opportunity to set project fees without scrutiny.

“When it comes to the private sector, we respect their choices of alternative product delivery, design-build, design-bid-build,” said Gibson of Associated General Contractors. “Some of these do indeed expedite the process, but that’s a private choice. But when you enter the public arena, that’s where the city manager, council and mayor are charged to protect the taxpayer’s investment, and we respect that as well. We recognize that continuity is critical for the private portion of the general contractor’s work, but to make the assumption you can do the same thing in the public sector is a different ballgame altogether.”

Gibson urged council members to sign off on Layton’s proposed policy change. He said open bidding is a “crucial” element of a successful public plan for redevelopment, such as Project Downtown, Wichita’s plan to redevelop downtown.

“You will protect everyone in this process,” he said. “And by protecting the process you instill confidence in the process so when the mayor, council or manager propose a future project, the public will be more likely to sign off on a future project. Confidence from the taxpayer is the most critical part of this process.”

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