Bidding - Specifications 101

Specifications are an intrinsic part of obtaining bids. Well written specifications can lower the cost of projects at BLMH and assure quality. Poorly written specifications can increase the costs and lower the quality of the various projects. Specifications, therefore, determine how unit owner's money is spent on the various projects funded from our reserves. So knowing a bit about the purpose of specifications, the bid process and the issues faced by the board when preparing specifications and soliciting and evaluating bids, is a useful part of being a unit owner. When you attend board meetings, and the board members are discussing or arguing the merits of specifications, bids and so on, some background knowledge will put you, the unit owner, on the same level as they are. Further, when things go wrong, and they invariably do, it is useful to know the how and the why. As you can probably guess, I am a proponent of the "Murphy's Law" school of thinking, which can be summarized by "if bad things happen, it will always be at the most inopportune time". Good specifications are an aid at keeping Murphy and his law at bay, but there is no guarantee. The bid process, politics and poor judgment can undo any specification, no matter how well written.

There are extensive articles and sources for the writing of specifications. For example, construction specification writing is taught at colleges as part of the engineering curriculum, and engineering societies such as the ASCE and ASME provide books and tutorials on the subject. The following is based on my personal and professional experience. I am not involved in the specification and bidding processes at BLMH and so I cannot vouch that our board adheres to the following. However, the process must be similar to what I describe, but may not adhere to all aspects of what I describe.

It is very important to keep the goal of the specification and the bid process in a tight focus. That goal is to select the bidder who is best able to provide whatever has been specified, at the agreed upon price and completed on the specified date, with no disputes and no litigation. If there is dissatisfaction with the result, it is just as likely to be the result of a lack of quality in the specification, or a flawed bid process, as the quality of the supplier.

The quality of writing of specifications will determine who can bid, will define the scope of the work, the types and qualities of materials to be used in the project, the qualifications of the bidder, the qualifications of workers on the worksite, the timelines for the project, final documentation to be submitted upon completion of the project, approval documents and procedures, the payment schedule and benchmarks for achieving payment, and even the selection process for the successful bidder. Various legal and jurisdictional bodies and local codes, national codes, OSHA and other worksite bodies will be cited in the specifications. Creditworthiness, insurance requirements, performance bonds and other financial aspects of the bidder will be specified. The methodologies for dispute resolution or mediation will be included in the specifications.

The lack of quality in specifications has been cited for contributing to many construction disputes. Most specifications are reviewed by counsel prior to issuance. To keep the technical language straightforward and minimize the use and cost of counsel, specifications are often segregated into the “legal” section and the “technical” section.

The specification will also include a bidder's questionnaire, which upon completion, is useful for determining the qualifications and quality of the bid. The questionnaire may include an accept/alternate signature area for each and every section of specification. An authorized officer of the bidder is to sign each of these, thereby agreeing to the specification as written, item by item, or providing a written alternate.

It is not unusual to work with suppliers during the writing of the specification. For construction projects, contractors, engineers and architects are the usual sources of specifications knowledge. However, contractors can bend the writer to use materials and techniques favorable to that specific contractor. There is nothing wrong with this, as long as the quality of the project is not compromised. A diligent writer of the specifications will be aware of this and will take steps to avoid producing a closed specification that unduly favors a specific supplier or contractor.

The specification is the first part of the bid process. The second part is the selection of bidders. The specification and other bid documents should clearly and concisely address the necessary qualifications of the bidders. That will discourage but not eliminate unqualified bidders from submitting a proposal. The reasons are many for clear and concise specifications. The time spent to prepare bids is costly, as is the time to review submitted proposals. “Time is money”; so too are credit worthiness investigations, etc. Litigation is to be avoided. "Burning" bidders will eventually reduce the number of responding bidders. It should be a goal to be as inclusive as possible.

The specifications meeting. A meeting with each bidder will address any questions or issues he or she may have, prior to their bid submittal. This may include a “walk through” of the property or area encompassed by the specification. Discussion of specifications is only held during a formal meeting for that specific purpose. It is advisable that tape or video recordings are made of the entire meeting and a list is made of issues and clarifications, and a formal letter of response to the bidder is drafted. This letter is kept for legal reasons; the discussion at the meeting can effectively change the specification. So the letter is issued. Once that all of the meetings with all interested bidders is completed, the various letters and meeting notes are reviewed. Formal “Addendum” to specifications are issued which address scope, material and schedule changes, either addressed during the pre-bid meetings or as a consequence of internal reflection. The goal here is to keep the playing field level and to assure that the specifications do reflect the desired final product or outcome of the project. Bidders sometimes provide worthy alternates to the original specifications. Such alternates can result in financial or time savings and a better result. Upon completion and issuance of the "addendums", the bidders will be allowed to submit their proposals.

The bid review. Once that bids are received, they are reviewed to determine if the bidder is qualified; i.e. meets the insurance, experience, financial and training qualifications of the bid documents. Bidders that do not are rejected. References are checked, other references, such as Credit Bureaus, the Better Business Bureau, the States Attorney, and county courts are checked to determine if there are complaints and the nature of pending disputes. The bid is compared to the specifications to assure that each and every item in the specification is addressed in the proposal. The goal here is thoroughness and completeness. One of the causes cited for contract disputes is ambiguity. The bidder interpreted something in the specification in a manner inconsistent with that of the specifications writer. Exceptions, alternates and omissions, if any must be reviewed during the bid review process. Some exceptions are an improvement to the specification, others are not.

After review of the bidder’s documents, the top three bidders are selected for final review. The basis for selection is formal and will include price and the comparison of the bid to the specification but may also include previous experience with the bidder, adherence to specification, ambiguity in the bid, qualification issues, bidder recommended alternatives, etc. A separate internal document should be prepared prior to opening of the bids. That document defines and assigns a weight to each aspect of the selection process. This avoids or minimizes internal disputes and disagreements. It may provide for the rejection of the lowest priced bid, unless there are predefined circumstances.

Many aspects of specification writing and the bid process are subjective. In the world at large, specifications can be and are written to exclude certain bidders. Bids are frequently not sealed, or are “leaked”, which is to say, the bid of one contractor is given to another, favored contractor. Of course, there are ethical and legal issues here. But we are dealing with sometimes large sums of money, the predisposition of the association and board members, and of course, with human nature. Greed and anger are powerful forces in human beings. It is very difficult to eliminate these problems. Sealed bids can help, but there is nearly always the opportunity to manipulate the bid review process and to provide the opportunity to alter a bid. It has been said that “where there is a will there is a way”.

In my experience, the best deterrents to bid manipulation is the quality of the initial specification coupled with the sealed bid process and not allowing re-submittal of bids. Preventing re-bids in such a situation will guarantee the best initial bid. Bidders really do put forth their best effort when it is known that there will be one, and only one, opportunity to bid. Re-bidding is to be avoided. Some will say that contractors or suppliers, eager for work, may provide a better second bid by eliminating “fat”. On the other hand, a high initial bid often is a symptom of an unqualified or careless bidder. A lower re-bid may be an attempt to get a job at a price that seems doable, but may not be. It has been said that "if it seems too good to be true, it usually is".
Of course, there are times when a project is bid out and upon opening of the sealed bids, it is determined that all of the prices are high! This can be the result of volatile commodities prices, a very tight worker supply, issues with specifications or unachievable completion dates, requiring extensive overtime. In those rare cases, revision to the specifications and re-bid is possibly the only solution. However, the work accomplished in the pre-bid meetings should avoid this type of problem.

Part of the bid process is the determination of suppliers or contractors to whom to submit the specifications; that is to say, to determine who to invite to bid. That goes beyond the scope of this post.

Defining the scope of the work is perhaps one of the more difficult parts of specification writing. Doing so defines the task to be performed by the bidder. If the job is a multi-discipline one, such as overall maintenance, then defining that scope of work can be an arduous task. Ambiguous or general language simply defeats the purpose of the specification and allows the bidder to interpret the work as he or she sees fit. This leads to disputes and cost over-runs, or "extras". Similarly, overly restraining scope documents may exclude aspects of the work or define and prescribe inefficient methods, also resulting in cost over-runs.

Finally, I suppose I should point out that the goal of the bid process is not always to select the lowest bidder based solely on price. The price is determined by the specification. If that were not true, then the next time we purchase a new automobile, we would be driving a Geo, Yaris or other automobile costing less than $10,000. The next time you drive through BLMH, make a note of the automobiles that people own, and then check their price. You will see what I mean; it isn't always "just about the money", no matter what people sometimes say.

Note: This is the first of several posts on specifications, bidding and contracts at BLMH.