At the April meeting of the Humble ISD Board, I asked how the District determined “best value” on a $2 million construction bid to renovate the roof of Kingwood Park High School. My question went unanswered and the Board voted to approve the contract unanimously.
After the meeting, I told the District’s CFO that the Board’s lack of openness deepened the level of distrust that exists within the community. I asked the CFO to send me the bid breakdown and, to his credit, he did the next day. After playing phone tag for a couple days, he explained it to me. He says the Texas Education Agency sets the evaluation criteria that all school districts in the state use, including the Humble ISD.
Seven Bids Received
Here are the bids they received on the project and the criteria against which they were evaluated.
(Download KPHS Roof Bid.)
How Best Value is Determined
Column 1 shows bidders.
Column 2 shows each bidder’s price for the basic contract.
Column 3 shows the bidder’s price for the basic package plus desired add-ons (if affordable). In this case, the add-ons were deemed affordable and the District decided to compare costs for Column 3 instead of 2. Had the bids been compared only on price, CS Advantage USAA would have been chosen. However, the evaluation factored in additional criteria. What were they and how was the final decision made?
Four people within the District’s purchasing and construction departments independently rate each potential vendor on seven factors. Each person has 100 total points and each factor has a different weight.
Column 4 shows the first factor: price; it receives 40% of the weight. Notice how the weights given vary inversely to the prices. For instance, the highest price receives the lowest score and the lowest price receives the highest score.
Column 5 factors in the reputation of the vendor. For instance, do they have good references that are current? This accounts for 15% of the total. It and the following factors receive more subjective ratings than the price by the District’s four member panel.
Column 6 factors in the quality of the vendors goods and services. For instance, “Do they always perform the job as outlined in the bid specifications?” This counts for 10% of the total.
Column 7 factors in the extent to which the goods and services recommended meet the District’s needs. This counts for 10% of the total.
Column 8 factors in the District’s past experience with the vendor. Said another way, “Did they deliver a good job on time and on budget?” This counts for 5% of the total.
Column 9 factors in the total long-term cost to the District. For instance, “Does the vendor warranty its work?” This counts for 10% of the total.
Column 10 factors in any other relevant factors. For instance, “Can the vendor install the roof before students return to school in the fall?” This counts for 5% of the total.
Columns 5-10 each have two sub-columns. The first shows the maximum points possible. The second shows the actual points awarded by the four-judge panel.
The last column shows the total points awarded to each vendor. When the District considered the additional factors, Sea-Breeze Inc. received 58.3 more points than the low bidder (371.3 vs 313), making Sea-Breeze the “best value” even though they were $156,000 more expensive. The low bidder came out in the middle of the pack; three bidders received more points and three received less.
Now that we know how the bid process works, new questions arise:
- Are these additional factors good to consider? Yes
- Do they automatically guarantee fairness? No.
- Could the process be manipulated? Yes. (See next two questions.)
- Can bid specs be written to favor a particular vendor? Yes.
- Is the process open to outside influence? Yes. (We all want to please friends and bosses. I say this as an observation on human nature; I’m not saying it happened in this case.)
- Does this process guarantee best value to taxpayers? It helps.
“Trust But Verify”
For all of these questions, we must rely on the integrity and fairness of the people managing and overseeing the bid process.
That is why financial transparency, openness, and
a willingness to communicate about bids are so important.
The motto that most CPAs use is “Trust but verify.” That’s why the District reviews the work of those rating the bidders to make sure no one tries to swing the vote. That is also why the Board should provide the public with the ability to see how it spends our tax money.
Letting the public “see” the process means increasing financial transparency in accordance with the recommendations of the Texas State Comptroller. See contracts-checklist.
It also means responding publicly and thoroughly when members of the community raise reasonable questions about multi-million-dollar contracts.
It would have been so simple to post this information online with the competitive bids. One can only wonder why it isn’t official policy and standard procedure.
In my next post, I’ll discuss the specs for this particular job.