Multiple Prime Bids vs. Single Prime GC Bids

Multiple Prime Bids vs. Single Prime GC Bids

About the Concerned Contractors of Pennsylvania • The Concerned Contractors of Pennsylvania is an advocacy group organized to protect and promote the rights of plumbing, electrical, HVAC and general contractors

About the Concerned Contractors of Pennsylvania • We are comprised of open shop and union shop contractors and trade associations that have come together to represent the many small business owners and construction workers across the state

About the Concerned Contractors of Pennsylvania • The mission of the coalition is to bring unfair and needlessly expensive bidding to the attention of the parents, students, school board officials, legislators and the media.

About the Concerned Contractors of Pennsylvania • The Concerned Contractors believe that by eliminating construction waivers to go single prime, thousands of small business owners will then have the opportunity to participate in local projects

The Separations Act • Since 1913, the Separations Act requires a minimum of four (4) prime contractors – General, Electrical, HVAC, and Plumbing – for every public building construction project exceeding $4,000

Multiple Prime Contracts are required for Public Projects • To keep the process of spending public funds open and clear of any possible manipulations; • To assure that the expenditure of public funds stays in the hands of the public officials charged with that duty;

Multiple Prime Contracts are required for Public Projects • To assure that work is awarded free of personal interest, bias and prejudice; • To protect materialmen and subcontractors from the whim of a general contractor in both the award of work and payment for work done

Single Prime General Contractor (GC) Bids • Less competition results in higher costs • Seven recent Single Prime GC bids came in over 14% above Architects’ estimates

Owen J. Roberts Hollidaysburg Erdenheim Springfield Martic Haverford Wilson

Multiple Prime Bid Savings • Five Projects from $1.3 – 30 Million were bid as Single Prime GC and as Multiple Prime • Total Multiple Prime Savings for Taxpayers $7,152,718 • Hollidaysburg Senior High School • Single Prime GC Bid 6/1/08 $34,407,000 Over Budget by $6,497,000 • Rebid Multiple Prime 9/30/08, still over budget 5%, but Multiple Prime bids were 14.8% less than lowest Original Single GC Bid • Multiple Prime Savings over Single Prime GC bid was $5,085,000 • Multiple Prime Bidding creates more competition & less cost to taxpayers

Total Multiple Prime Savings for Taxpayers $7,152,718

Limited Single Prime GC competition • No GC submitted a Single Prime bid at A.M. Kulp ES, but three GCs submitted Multi-Prime bids for the same project • Only one GC submitted a Single Prime bid at the South Western SD Transportation Facility, Ferguson ES, Juniata Valley Jr/Sr HS • Two GCs submitted a Single Prime bid at Haverford MS • Three GCs submitted Single Prime bids at Owen J. Roberts MS, the 3rd bidder was over 10 million dollars higher than the low bidder • Three GCs submitted Single Prime bids at Erdenheim ES, Hollidaysburg Sr. HS, Springfield Literacy Center

Single Prime Bids Limits Competition • Few Pennsylvania GCs are capable of bonding an entire school project as a Single Prime. • The low bid for OJ Roberts MS was over 43 million, Haverford MS was over 50 million. How many GCs out there have the bonding capacity to take on a 50 million dollar project? • Small and mid-sized GCs, the local GCs, that have performed school construction for years will be pushed out of the business by Single Prime bidding because they won’t be able to bond the entire project.

Single Prime Bids Limits Competition • When the local GCs exceed their bonding capacity the door is open for out of area and out of state GC brokers to move in and enjoy a virtual monopoly • We have just seen Single Prime bid results where only one and two prices were received. On one project nobody bid the Single Prime contract. On a recent multi-prime project there were 11 bidders on the plumbing alone • Single Prime is a step in the wrong direction. If PA is serious about saving school construction costs then General Construction work should be broken down further into multiple primes. The major subs like masonry, roofing, site work, should be prime contracts too then school districts would get more bids at lower cost • Multi-prime is a growing trend nationwide because it saves money. Construction Managers know this and promote it and nobody knows it better than General Contractors. That is why few GCs perform their contracts with their own workforce, they hire subcontractors

Single Prime Bids Limits Competition • Limited GC competition on Single Prime projects increases the potential for bid collusion and price fixing • We have already seen scandalously high prices with Single Prime. Just imagine what the prices will look like when most of the GCs reach their bonding capacity and the competition is even thinner. • Single prime bids benefit a chosen few at the expense of everyone else • Thousands of PA contractors that are qualified and bondable should have the right to bid on the school construction projects that their tax dollars and their employees tax dollars fund. Instead, Single Prime gives this work to a handful of well financed GC brokers at the expense of the taxpayers.

Single Prime Bids Add A Middleman • When has adding a middleman to a process ever resulted in lower cost? • GC brokers markup the subcontractor’s bid prices on bid day • GC brokers markup all subcontractor’s change order proposals • GC brokers must add the cost of “subcontractor coordination”

Single Prime Bids Add A Middleman • Under single prime bids, subcontractors still need to have on-site supervision • Nearly every project is custom made, comprised of millions of pieces, hundreds of systems, assembled on location, by dozens of trade contractors and hundreds of skilled trades people. The same amount of supervision will be required if HVAC, Electrical, & Plumbing work is done Single Prime or Multi-prime.

Single Prime Bids Add A Middleman • Subcontractors submit artificially inflated bids to GC brokers because of bid shopping, a longer wait for payment, a longer wait for answers, unjustified back charges, & many GC’s “shut-up & eat it” mentality with their subcontractors • GC’s will take the lowest Sub bids on bid day and then go “shopping” among other Subs for a lower price. If successful, all of the savings add to the GC’s profit, not the School District’s

Lost Savings to Taxpayers from GC Bid Shopping • Any savings from GC bid shopping on Single Prime projects occurs after the bid & benefits only the GC and not the taxpayers • We are talking about over 5 million dollars in the case of Hollidaysburg HS alone. • Single Prime GC Bid $34,407,000 • Multiple Prime Bids $29,321,400 • Potential from GC Bid Shopping $5,085,000 of additional profit for the GC

Multiple Prime Contracting provides a Fair & Open Bidding Process • For nearly 100 years PA Taxpayers, School Districts and Contractors have benefited from a fair and open HVAC, Electrical, & Plumbing bidding process • Single Prime bidding hides the HVAC, Electrical, & Plumbing bid results from the view of the School District, Taxpayers, and Contractors. With Multi-Prime everyone knows the value of each contract and the number of bidders. The low bidder can start to plan for their work • Strong competition from qualified, bondable HVAC, Electrical, & Plumbing Contractors on Multi-Prime bids keeps prices low!

Multiple Prime Contracting Provides a Fair & Open Bidding Process • Multi-Prime bids generate lower prices because the HVAC, Electrical, & Plumbing bid results are known on bid day • On Multi-Prime bids, if a HVAC, Electrical, & Plumbing contractor needs work, he may bid less to fill a gap in work. If he doesn’t get today’s bid, he’ll continue to put out lower bids until he gets a job. • However with Single Prime the subcontractor cannot continue to bid low because he won’t know if he got the first job he bid until the GC awards it months later. • Timely information available with Multi-Prime bids is critical to all contractors and ultimately benefits the School Districts and the Taxpayers!

Single Prime Bids will go to Out of State GC Brokers • The national construction unemployment rate is over 22% • Bonding limits will result in large out of state GC brokers who will bring in many of their out of state subcontractors • Single Prime will bring more out of state construction workers and take jobs away from PA residents • At the completion of the project the out of state GC brokers, subs and workers leave PA taking our tax dollars with them • Multi-Prime bids keep PA’s school construction jobs and our tax dollars with PA resident workers and contractors

Multiple Prime Contracts Provide Owner Control of the Project Costs, Quality, & Schedule • On Single Prime jobs subcontractors don’t have to provide a bond to protect the School District’s Financial Risk • If a bond is required, it protects the GC Broker, not the School District • On Multi-Prime projects HVAC, Electrical, & Plumbing contractors are required to provide a bond and to submit prequalification statements which protect the Owner

Multiple Prime Contracts Provide Owner Control of the Project Costs, Quality, & Schedule • Single Prime GC’s don’t select their team of subcontractors before the bid. The Single Prime GC’s are forced to use the lowest price subs on bid day regardless of their financial condition or qualifications if they want to have a chance at getting the job. The low subcontractor may not employ competent workers duly trained and skilled in their crafts through a state bona fide apprenticeship program.

Multiple Prime Contracts Provide Owner Control of the Project Costs, Quality, & Schedule • GC brokers can actually profit if an unqualified sub goes bankrupt on the job • Generally, subs have completed a month or two of work before they receive their payment. If the sub goes bankrupt the GC may have half of the sub’s work complete without having made payment. The GC can bring in a replacement sub to finish the remainder of the project at half the cost & pocket the difference

Multiple Prime Contracts Provide Owner Control of the Project Costs, Quality, & Schedule • With Multi-Prime bids, the HVAC, Electrical, & Plumbing contractors police the quality of construction on a project • If the predecessor work is not fit and sufficient to receive the next work activity in the sequence then it is the responsibility of the HVAC, Electrical, & Plumbing contractor to point out the problems and get them resolved before proceeding. This important check and balance happens regularly on Multi-Prime projects, but on Single Prime projects the subcontractors will be told by the GC to keep their mouth shut and to eat any extra costs. Unfortunately, the subcontractors will end up working in the interest of the GC broker who signs their check and who they depend on for future work.

Multiple Prime Contracts Provide Owner Control of the Project Costs, Quality, & Schedule • GC brokers are not qualified to coordinate the work of HVAC, Electrical, & Plumbing contractors • The GC’s Project Superintendent and Project Manager typically have a background in one of the general construction trades. Consequently, they lack the knowledge to make informed decisions affecting the work of the HVAC, Electrical, & Plumbing contractors

Multiple Prime Contracts Provide Owner Control of the Project Costs, Quality, & Schedule • Every Mandate Waiver Application reviewed was “supported” by a letter from an Architect enumerating the purported Cost Savings and Convenience of dealing with a Single Prime GC • Not one of these Experts offered a discounted fee to the School District for all this Savings and Convenience • The Architect on one Multiple Prime project which came in $6 million under budget actually requested a higher percentage fee because of the savings! • There are no administrative savings if the architect charges the same fees and if a construction manager or clerk of the works are still needed • The long term maintenance and repair costs of poorly constructed buildings will be astronomical

Single Prime will not fix Design Problems, Change Orders or Claims • Change Orders result from: • Design Errors and Omissions • Unforeseen Conditions • Owner Requested Changes after bid day • Change Order costs will be incurred regardless of which bidding method is used, if contract conditions change • When an individual subcontractor is responsible for their Change Order cost they are held accountable for the cost by the owner

Single Prime will not fix Design Problems, Change Orders or Claims • Claims typically result from one or more of the parties not fulfilling their responsibilities under the contract. These responsibilities are defined by contract and simply need to be enforced consistently to avoid claims • Claims will be more likely with single prime because of the inexperienced and unbonded subs and the typically longer wait for answers

Single Prime will not fix Design Problems, Change Orders or Claims • Change orders and claims submitted with single primes will be larger because of the GC markup for Overhead & Profit • If a Single Prime GC goes bankrupt all the subcontractors will have claims and the project will grind to a halt • The Owner will have no contractual relationship with the subcontractors to continue until another GC arrives

Multi-Prime Bid Day Savings Exceed Single Prime Administrative Savings • The administrative savings touted by Single Prime proponents are based on their own fictitious estimates and are not based on facts • These are the same “experts” who missed the budgets on the seven Single Prime GC bids by over 21 million dollars or 14% • The contractors who bid and perform the work are the experts in construction cost, not the GC brokers and architects • There is no way to prove administrative savings

Multi-Prime Bid Day Savings Exceed Single Prime Administrative Savings • Architects are paid a percentage fee based on the overall value of a project and have an incentive to drive up the cost, not produce taxpayer savings • With Single Prime, architects provide less service but appear to charge the same fees • Architects would have to lower their fees by millions on single prime projects to offset the bid day savings proven by Multi-Prime bidding

The Task Force Recommendation to Bid Both Ways was a Success • Since the Task Force Report, Multiple Prime bidding has saved multi-millions of taxpayer dollars on school construction projects • William Tennett HS saved $5,076,760 • Bancroft ES saved $3,644,535 • Columbia Jr/Sr HS saved $1,089,600 • Muhlenberg MS saved $200,000

Total Multiple Prime Savings for Taxpayers $10,010,895 Taxpayer Savings: $200,000

Waivers of Section 751 of the PA School Code should be Prohibited Every Multiple Prime Bid has resulted in Significant Savings over a Single GC Bid The Mandate Waiver experiment has failed to produce any purported savings & should not be renewed

Multiple Prime Bids vs. Single Prime GC Bids