| Jo Ann Henrie Foreman |
 COUNTY OF MENDOCINO Grand Jury |
Telephone: (707) 463-4320 |
GRAND JURY |
BID PROCESS AND CONTRACTING IRREGULARITIES WITHIN MENDOCINO COUNTY GENERAL SERVICES DEPARTMENT AND UKIAH UNIFIED SCHOOL DISTRICT The Grand Jury investigated alleged improprieties in the awarding of contracts to a certain general contractor for the construction of the Mendocino County Administration Center (Administration Center) and several construction projects for the Ukiah Unified School District (District). No illegal activities were found, but inadequate bidding and contracting practices within each public entity led to the appearances of bid rigging and favoritism. REASON FOR INVESTIGATION The investigation was conducted in response to a citizen complaint regarding two unrelated entities. The investigation is reported in two sections: A. The County Administration Center and B.The District. A. Allegation of bid rigging by adding alternatives after original bid was received in order to allow a certain contractor to be awarded the contract for remodel/construction of the Administration Center. METHOD OF INVESTIGATION Documents reviewed included minutes of the Board of Supervisors pertaining to construction of the Administration Center. Also reviewed were Department of General Services (General Services) weekly construction meeting notes. bid documents, plans, bid procedure guidelines, construction contracts, and change orders. Interviews were conducted with the County Administrative Officer (CAO), General Services Director, personnel responsible for requesting bids, and the complainant. FINDINGS 1. A bid proposal, including plans and specifications. for construction/remodel of the Administration Center was released for bid on August 11. 1994. to Builders Exchanges throughout Northern California and other general contractors on the General Services lists for bidders. Several other contractors requested and paid for sets of plans during the bidding period. 2. The original plans included requests for seven alternate bids for deletion of certain portions of the construction and certain types of building materials. These included the possible deletion of a two-story addition on the south side of the building and a parking lot. 3. General Services documentation shows that two addenda to the plans were issued to parties who had received the original bid proposal. 4. Only one bid was received for the bid opening on October 11, 1994. (The envelope in which the bid was received was date-stamped. but the bid documents were not.) 5. General Services' staff reported that they had expected other bids and had no information as to why no other bids were received. 6. The one bid, for S5.79 1,000 was substantially over the 54.400,000 originally estimatei and tentatively available for construction of the project. 7 On October 26, 1994, the GAO recommended to the Board of Supervisors that they accept the bid rather than rebid the project. and scale back the project to be within the limits of available financing. 8. November 1. 1994. Board Minutes rerlect that the GAO repeated his proposal and the General Services director reported that the bid had a number of alternates which could be deleted to reduce the cost of the project. At that meeting, the Board approved the following: 'scope of the project modified to bring into line with available financing." (No dollar amount was specified at this meeting.) The GAO was instructed to report back with information on phasing the contract. 9. November 22, 1994, Board Minutes state that the Board directed that the contract for the refined project be awarded for $4,996.000. The GAO stated that $4,600,000 was now available and that $500,000 could be borrowed from the County Treasury to complete the project. 10. A contract dated December 7. 1994. was awarded for 54.996.000. Bid alternates #1 ($750,000 for a two-story building) and #3 ($45,000 for a parking lot) could be added back by March 6, 1995. (Bid documents referred to and included in the contract are not dated and do not have a date-received stamp on them.) 11. Subsequently, between September 25, 1995, and November 1, 1996, Change Orders #1 -#38 (including Bid Alternate #3 in Change Order #2, September 26, 1995) totaling $785,091 were approved by the GAO for a total cost of $5,781,091. 12. Final direct costs of the contract were S5,78 1,091. Other costs associated with the project included a separate asbestos removal contract, additional architectural review contracts, and a contract for construction supervision and oversight. 13. At a weekly planning meeting (called by General Services because of problems with the contractors stating that the plans were not complete) during the beginning stages of construction. the architect stated, "What we did is we put the alternate in there to allow you guys to get this job. If it had not been possible to trim out three-quarters of a million dollars, and get within the budget, that was established by the Board, initially it was decided it would go back out to bid. At that point, we would have scaled it back, we would have redrawn the plans, and prepared the bid. But because that contingency was in there, you guys were able to get the contract" ("Daily Progress Report. Administration Center Project.," April 27, 1995). 14. This statement by the architect, along with the lack of dates on the bid documents, may have given the complainant the impression that bid rigging may have occurred. However. the original plans and statements by the General Services Director in the November 1, 1994, Board Meeting show that seven alternates were available from the beginning of the bid process. There is also no evidence to show that any decision had been made to back out to bid." RECOMMENDATIONS 1. The County should establish a bid and contract policy that deals expressly with the situation in which only one bid is received. (See Findings 4- 11.) 2. The 1998-99 Grand Jury should review the entire Mendocino County Administrative Center construction project to determine why the project ended up costing approximately the same as the original bid, but without the 5750.000 two-story building. Other issues to be addressed would include the source of funding for these over-budgeted costs and what entity approved the change orders and subsequent funding. (See Findings I - 14.) RESPONSE REQUIRED Mendocino County Board of Supervisors (Recommendation 1.) B. Allegation of bid-rigging and bid document irregularities in school remodeling projects for the Ukiah Unified School District METHOD OF INVESTIGATION Documents reviewed included Ukiah Unified School District (District) bid documents and construction contracts for school construction and remodeling from 1994 through 1997. Board of Trustees (Board) minutes and policies, and transcription of a special school board meeting, September 5. 1995. The complainant and the District superintendent were interviewed. FINDINGS 1. Bid document irregularities were presented at the September 5, 1995, Special Board Meeting by a party who wished to protest the awarding of a contract for the construction of the middle school in Redwood Valley. The attorney for the District advised the Board that the errors and inconsistencies on the bid documents were not substantive. The Board subsequently awarded the contract as per its decision. 2. Review of the bid documents for the construction/remodeling projects show that legal bidding procedures have been followed. Each project had a bid opening where the bids and alternate deletions or additions were recorded on a bid summary sheet. On the Yokayo School project the sum of the additions and deletions for the low bidder was $10. This gave the impression that the contractor had bid $10 for alternates in order to be low bidder on the contract. The $10 was actually the sum of 12 separate deletions and additions ranging from deleting $96,000 to adding $45,500. 3. The District Superintendent of Schools reported at the September 9, 1997, Board meeting that for a future agenda item the District should be 'improving the contract process." As of May, 1998, that item had not been considered on the agenda. The Superintendent provided the Grand Jury with a possible bid procedure template. RECOMMENDATIONS 1. The Board should review its policies for bids and specifications and contracts to insure that they conform to current State Codes. (See Finding 3.) 2. District staff should make bid document requirements clear to prospective bidders, and then check the bid documents for compliance before awarding contracts. (See Finding I.)
RESPONSE REQUIRED Ukiah Unified School District Board of Trustees (Recommendations 1, 2.) |