Best Value Procurement MnDOT State Aid for Local Transportation Minnesota Local Road Research Board...

Best Value Procurement

MnDOT State Aid for Local Transportation

Minnesota Local Road Research Board

MnDOT Office of Construction and Innovative Contracting

Trainers

• Steve Howe, HNTB CorporationMnDOT GEC DB Consultant

• Mike Marti, SRF Consulting Group, Inc. LRRB Technology Transfer Specialist

• Guidance from OCIC

• DSAE

Additional Resources

• Previous LRRB deliverable focused on the basics of contracting, including:• Contracting 101

• Provides insight on good contracting principles

• Innovating Contracting• Best Value• Alternate Bid• Bidder Qualifications

Training is based on MnDOT’s manual

• Developed by MnDOT’s Office of Construction and Innovative Contracting

• Technical Advisory Committee consisted of representatives from MnDOT, Local Governments, FHWA, Contractors and Consultants

• This is a workshop. Questions are encouraged as we go through the presentation.


• Manual is intended to aid agencies in using the best value method to procure construction contracts.

• Seeks to promote a consistent procurement process for agencies and a consistent proposal process for construction contractors involved in best value procurement.

• This training has been developed for Minnesota Cities and Counties.


Specific objectives of the manual include:

• Provide baseline approaches that fit within MnDOT policies and state law.

• Provide guidance for determining when to use best value procurement.

• Provide guidance for completing a transparent best value process that is fair to both the agency and the industry.

What is Best Value Procurement?

• Traditionally, price has been the sole factor considered in the selection of construction contractors by government agencies.

• Best-value procurement allows other factors to be used in evaluation and selection:• Qualifications• Schedule• Quality• Performance-based criteria

What is Best Value Procurement?

• A procurement process where price and other key factors can be considered in the evaluation and selection process to minimize impacts and enhance the long-term performance and value of construction.

National Cooperative Highway Research Program (NCHRP)Report 561

www.onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_561.pdf

State Law for Best Value ProcurementMinnesota Statute 16C.02, 16C.03 and 16C.28

• In 2007, the Minnesota Legislature enacted a law that enables public agencies to select contractors based on best value, rather than low bid.

• The law applies to state agencies, cities, counties, and school districts.

• Any personnel administering procurement procedures for best value procurement must be trained.

• Law is not prescriptive as to what constitutes training - several organizations are offering.

• Applying Best Value procurement is a learning process. Taking one class does not make a person an expert.

•


Highlights of the law include:

• Price must be one of the evaluation criteria.

• Other criteria may include: • Quality performance• Timeliness of performance• Customer satisfaction• On-budget performance• Ability to minimize change orders• Ability to prepare plans• Technical capacity• Qualifications• Ability to assess and minimize risks


• Performance on previous projects does not include the exercise or assertion of a person’s legal rights.

• Best value determination must be based on the evaluation criteria detailed in the solicitation document.

• If criteria other than price are used, the solicitation document must clearly state the relative importance of price and other factors.


Minnesota Statute 16C.02, 16C.03 and 16C.28Subd. 4a. Best value; construction.

“Best Value" describes the result determined by a procurement method that considers price and performance criteria, which may include, but are not limited to:

1)Quality of the vendor's or contractor's performance on previous projects2)Timeliness of the vendor's or contractor's performance on previous projects3)Level of customer satisfaction with the vendor's or contractor's performance on previous projects 4)Vendor's or contractor's record of performing previous projects on budget and ability to minimize cost overruns5)Vendor's or contractor's ability to minimize change orders6)Vendor's or contractor's ability to prepare appropriate project plans7)Vendor's or contractor's technical capacities8)Individual qualifications of the contractor's key personnel9)Vendor's or contractor's ability to assess and minimize risks

RecommendedRecommended

PossiblePossible

Potential FuturePotential Future


"Best Value" describes the result determined by a procurement method that considers price and performance criteria.

Recommended Performance CriteriaRecommended Performance Criteria•Ability to prepare plans•Technical capacity•Qualifications

Benefits:

• Allows agency to require specific experience, certifications, capabilities, equipment or technical skills

• Easily structured as objective criteria• Lowered risk of protested award

Challenges:

• May create barriers to contractors if requirements are unrealistic


“Best Value" describes the result determined by a procurement method that considers price and performance criteria.

Possible Performance CriteriaPossible Performance Criteria•Ability to assess and minimize risk•Ability to minimize change orders

Benefits:

• Allows contractor to identify, minimize or take on risks and/or assume responsibility for certain change order conditions

• Can reduce risk of cost and schedule overruns

Challenges:

• Relatively complex evaluation process is necessary

• Elevated risk of protest award• Potentially may transfer risk to

contractor that may increase project costs

Minnesota Statute 16C.02, 16C.03 and 16C.28Subd. 4a. Best value; construction.“…"best value" describes the result determined by a procurement method that considers price and performance criteria…

•On-budget performance on previous projects•On-time performance on previous projects•Quality performance on previous projects•Customer satisfaction on previous projects

Potential Future Performance CriteriaPotential Future Performance Criteria

Benefits:Benefits:• Previous performance can be a good

indicator of future performance• Agency increases likelihood of success

on the project

Challenges:Challenges:• No objective measure is generally available

to assess previous performance• Ultimately should use a database of past

performance• Cannot include contractors exercising or

asserting of legal rights per statute• Significant increase in risk of protested

award• Can be politically challenging

Minnesota Statute 16C.02, 16C.03 and 16C.28Subd. 4a. Best value; construction."Best Value" describes the result determined by a procurement method that considers price and performance criteria.

Best Value Process must be:Best Value Process must be:

•JustifiableJustifiable

•DefensibleDefensible

The Process Offers…

• Provides another tool to address increasing pressure to deliver high-quality projects faster and more cost-effectively by allowing the award of contracts on factors other than low price.

• MnDOT has developed this simplified best value approach as a starting point to apply best value procurement.

Start slow…the process may be expanded as your agency become more familiar with its use.

A few Minnesota agencies have been implementing best value procurement over the past few years and have learned from their experiences.

What the Process Does Not Offer

• Cannot guarantee the success of a project.

• Should not be used as a vehicle for restricting competition or applying arbitrary or unreasonable discretion in the selection of contractors.

• Should not be used to resolve existing administration problems or remedy unclear specifications.

Project managers should be aware that Best Value Procurement…..

• May take longer than a traditional low-bid process, depending on how much time is provided to prepare proposals.

• May require additional agency effort for the preparation of bid documents and evaluation of proposals.

• May increase costs to the industry to prepare and submit bids.

• May increase the project cost if selection is based on higher quality or an increased effort by the contractor.

When to use

• Manual provides a series of questions to determine if a project is a good candidate.

• Ultimately it is a project management decision…is there enough benefit to the project to offset additional efforts required of the agency and contractors.

• When using State Aid funds, Local Governments must consult with their DSAE.• MnDOT OCIC is also a resource.

Overview of MnDOT BV Procurement

• Streamlined approach to best value procurement that can be applied to small to mid-sized projects.

• Intended for projects that have been advanced through final design

• Uses criteria based on what will most benefit the project and selects the low bid from proposals meeting the criteria.

Definitions

• Non-Responsive Bidder – A bidder who fails to meet the proposal requirements, fails to submit the required elements of the technical proposal, or whose submittal fails to prove they meet the requirements of the project Special Provisions.

• Responsive Bidder – A bidder who meets the proposal requirements, submits the required elements of the technical proposal as defined in the project Special Provisions, and meets the pass/fail criteria for the work described in the project Special Provisions.

Overview of MnDOT BV Procurement

MnDOT is using a detailed two-step process that is similar to Design-Build: • During Phase 1, bidders submit technical

proposals. MnDOT evaluates and shortlists responsive bidders.

• Phase 2 includes submittal of a sealed cost proposal by each responsive bidder. Cost proposals are opened.

Apparent low bidder is lowest priced responsible bidder. That contractor then goes through the award and approval process.

MnDOT Best Value Procurement Steps

1. Select Project for Best Value2. Coordinate with FHWA

Coordinate with State Aid (Local Governments)

3. Coordinate with Industry4. Determine Best Value Criteria5. Prepare Request for Proposals and Final Design6. Advertise Project7. Pre-Bid Conference8. Receive Proposals and Bids9. Opening of Bids10. Selection and Award





• Follow the screening criteria outlined in Section 2 of the manual to determine if a project is appropriate for best value.

• Contact State Aid as early in the process as possible (recommended at 30% plan completion)

for assistance.





• Projects that include federal funds require approval by FHWA to use best value.

• Each project must receive Special Experimental Project 14 (SEP-14) approval.

• Local governments considering BV for projects with federal or state aid funding must consult their DSAE to review their process.





• Early coordination with contracting industry will allow them to prepare and will increase competition.

• Contact MnDOT and leverage their ongoing meetings with the Association of General Contractors (AGC).




3. Coordinate with Industry4. Determine Best Value Criteria5. Prepare Request for Proposals and Final

Design6. Advertise Project7. Pre-Bid Conference8. Receive Proposals and Bids9. Opening of Bids10. Selection and Award

• Determine the pass/fail best value evaluation criteria that will be used in the procurement.

• Evaluation criteria should be based on the elements that will bring the most value to the project.

Recommend evaluation criteria:•Qualifications of Personnel

•Experience of Personnel on Similar Projects

•Experience of Contractor on Similar Projects

•Availability of Key Personnel, Equipment or Materials

Others will be discussed later in training





• Prepare a plans, specification and bid package…including Special Provisions.

• Important that all information for achieving a passing rating is clear and understood by the evaluators and contractors.





• Advertise the project following normal advertising process for projects.

This may require a longer time frame than low cost procurement (technical proposal review, etc).





• Host a pre-bid meeting prior to the submission of the un-priced technical proposals and cost proposals.

• Attendance should be strongly encouraged for all bidders.

• Invite DSAE.• Review proposal requirements in detail.





• Proposals are to be delivered in two parts:• Technical proposals• Cost proposals

• Technical proposals should be submitted at least two weeks prior to the cost proposals to allow sufficient time to review before opening cost proposals of responsive bidders.





• All bidders that submitted a responsive technical proposal will be permitted to submit a cost proposal.

• All bidders that submitted non-responsive proposals will not be permitted to submit a cost proposal.





• Bids will be opened at the time indicated in the Advertisement for Bids.

• The project will be awarded to the responsible bidder submitting the lowest bid price of those receiving a passing rating on the technical proposal.

Summary: Best Value Procurement

• Process must be:• Justifiable• Defensible

• Recommended Process• Follows NCHRP and FHWA guidelines• Start slow…expand with experience• MnDOT manual available November 1

on the OCIC website

• Leverage available resources

Resources• LRRB Innovative Contracting

www.lrrb.org/pdf/2009RIC02.pdf

• NCHRP Report 561www.onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_561.pdf

• MnDOT Office of Innovative Contractingwww.dot.state.mn.us/const/tools/innovativecontract.html

• MnDOT State Aid website•Best Value statute•Best Value Training PowerPoint•Design Build statute•Link to MnDOT Best Value Procurement Guide

Questions?

For more information contact:MnDOT Office State Aid for Local Transportation

Thank you and additional resource:MnDOT OCIC: Kevin Kosobud, [email protected]

Date post:	01-Apr-2015
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