High-speed rail agency changed bidding standards

State officials expanded the field in hopes of saving millions.

The Fresno BeeApril 25, 2013 

When the California High-Speed Rail Authority put the first stretch of its statewide train system out for bids last year, the agency set a high technical standard for five contracting teams courting the more than $1 billion construction contract.

In March 2012, the authority's board decreed that even if all five teams submitted bids, only the three most "technically competitive" firms could compete based on cost to build the 29-mile segment in Madera and Fresno counties. The teams with the lowest technical scores would be dropped and their price envelopes returned unopened.

That rule, however, didn't stick. In August -- months before contractors submitted bids -- the authority's executive staff quietly altered the process without formal action by the board.

What was touted as a rigorous, competitive procedure to ensure that only the most technically sound bids would advance instead became a "pass/fail" analysis requiring contractors to only meet "the minimum elements required" before cost would be considered for all bidders.

That change -- seemingly minor in August -- is taking on greater significance now as the authority negotiates with its lowest-cost bidder. The team of Tutor Perini Corp. of Sylmar, Texas-based Zachry Construction and Parsons Corp. of Pasadena bid about $985 million to build the Fresno-Madera segment. That beat the state's estimates of $1.2 billion to $1.8 billion. The consortium's bid was deemed the "apparent best value."

But Tutor Perini/Zachry/Parsons also had the lowest technical score -- 20.55 points out of 30 -- among the five contracting teams. Put another way, the Tutor Perini group was deemed to be the least skilled of the bidders. That has prompted speculation that the team's bid may potentially have been eliminated from consideration if the evaluation process remained unchanged, and given rise to concerns about rigging the analysis in favor of Tutor Perini.

The rail authority declined to answer specific questions from The Bee about why the agency chose to amend the bid-evaluation process. Authority spokesman Rob Wilcox said in an email that "the authority's objective was to increase transparency and gain greater value for the project and the state."

"There was a real concern that by not opening all the bids, it could have left hundreds of millions of taxpayer dollars on the table," he said.

"It is important to note that on Caltrans design-build projects that use best value, they also base valuations on a combination of technical score and price, and all responsive bids are opened," he added.

Idea of rigging denied

A contract with Tutor Perini/Zachry/Parsons could be presented to the rail authority's board for approval in June.

In a letter to state legislative leaders this week, authority CEO Jeffrey Morales rejected the notion that the change had the effect of rigging the evaluation process in favor of Tutor Perini/Zachry/Parsons. "Any suggestion or implication that decisions were made with particular bidders in mind is completely without merit and has no basis in fact," Morales wrote.

Morales added that it's unfair to conclude that any bidding team would be dropped from consideration under the original process "because the actual bid proposals were submitted in light of the improved evaluation process, not the preceding one," he wrote. "Bidding teams modify their proposals to reflect all terms of the (request for proposals), including the scoring and evaluation criteria."

He also asserted that the change in process did not lower the bar for technical analysis. After contractors submitted bids in January, Morales wrote, "there were two separate reviews of the technical portions, to ensure that all criteria and requirements were met and that the proposers had demonstrated full capability to deliver the project." Only after the technical reviews were complete, he added, were the price envelopes opened.

The contractor's technical merit will be crucial because of the challenges presented by the project -- a controversial and politically divisive effort that will be closely scrutinized because it is the first chunk of the first high-speed train system proposed in the United States.

In addition to building the railbed from Avenue 17 near Madera to American Avenue south of Fresno, the project includes a new bridge over the San Joaquin River; elevated tracks over Herndon Avenue; relocating portions of Golden State Boulevard through northwest and central Fresno; a tunnel or trench under Belmont Avenue, Highway 180 and a freight railroad line; elevated tracks above Highway 99 south of downtown Fresno; and a dozen new or rebuilt street over- or underpasses.

The winning firm will be tasked with completing the design work -- which the rail authority and consultants had drawn to about 30% completion -- and building the line.

Change not explained

In its March 1, 2012 decision, the authority's board voted 5-0 to issue a request for bids for the Madera-Fresno segment and to use a two-step method to assess bids. At that time, five teams of contractors including Tutor Perini/Zachry/Parsons were "pre-qualified" to bid based on their technical capability to handle the job.

Thomas Fellenz, the authority's chief counsel, told the board that the two-step analysis would "accomplish the goals of the authority best" by securing the most technically sound bids and competitive prices.

The process called for a rigorous technical assessment of all of the bids while each firm's price remained sealed. Only the three highest-ranked proposals under the technical evaluation would be eligible to compete for cost. Among the factors considered in the technical analysis were the contractor's understanding of the project, conceptual engineering, ability to stay on schedule, solutions to anticipated problems, quality and self-certification.

"We're making it very competitive because, you know, if you're not in the top three, you'll be dropped off," Fellenz said last year.

The authority board's March 2012 vote also allowed the agency's CEO "to make appropriate non-substantive changes" in consultation with board chairman Dan Richard to the terms under which contractors were to submit bids.

The revised language detailing the bid-evaluation process was tucked innocuously into an addendum to the agency's request for proposals -- the fourth such addendum, issued on Aug. 22.

Wilcox, the authority's spokesman, would not address why a process approved by the board in March was no longer suitable in August, or why the change was made without notification to or approval by the board. The agency also did not address who within the authority's leadership decided that changing the bid-screening process was "non-substantive," or disclose when Richard, the board chairman, was consulted by Morales on the amendment.

Addendum to contract

In his letter to legislators, Morales -- who was hired in June 2012 -- defended the change. "Notification was sent to legislative staff and members of the media" about changes throughout the bidding process, including the Aug. 22 addendum.

The August addendum and others were posted on the authority's website. However, The Bee received no written or emailed notification of such changes, as has been routine with many other aspects of high-speed rail media relations.

Between March 2012 and January 2013, when the contracting teams submitted their bids, Morales said the agency issued nine addenda to the original request for proposals as "bidders raised questions and concerns," Morales wrote. The changes, he added, "ranged from highly detailed technical clarifications to broader issues relating to liability and the manner in which the authority would evaluate and score the proposals."

Addendum 4, Morales said, "required the authority to open the bids from all five teams as long as each bid was technically sound."

The authority would not disclose whether any of the prospective contracting teams threatened to not submit bids unless the process was changed.

The reporter can be reached at (559) 441-6319, tsheehan@fresnobee.com or @tsheehan on Twitter.

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