When you start to suspect the light at the end of a tunnel is a train... bitching

[CatCube]

We just had a bid opening at work for a construction project.  The Government estimate for the work was $2.2mm.  One of the bidders, who had done similar work at this exact site, bid $2.8mm.

The winning bid was for $1.4mm.

Work starts in a few months.  I feel like the minion in that Austin Powers bit with the steamroller.

What have you all had at work that you feared you were about to watch go bad in slow motion?

[bobobob]

I've never understood how the bidding process works. What happens if the low bidder runs out of money halfway through the project? Isn't it easier just to allocate more money and have the same company finish the job, even if they "cheated" their way into winning the job in the first place?

[euler]

MY current project has been going on for a couple of months, and the customer still hasn't approved what language will be used, much less any functional requirements. There's way too many cooks in their kitchen, but none of them want to actually approve anything, and the only thing they can all agree on is that it's due in December. My team is almost to the point of just starting work without any approval.

I've never understood how the bidding process works. What happens if the low bidder runs out of money halfway through the project? Isn't it easier just to allocate more money and have the same company finish the job, even if they "cheated" their way into winning the job in the first place?

My understanding is that this is pretty much the way it works in most projects.

[CatCube]

I've never understood how the bidding process works. What happens if the low bidder runs out of money halfway through the project? Isn't it easier just to allocate more money and have the same company finish the job, even if they "cheated" their way into winning the job in the first place?

To protect against the Contractor going bankrupt is part of what a performance bond is for.  As a practical matter, exactly what you're saying happens is what tends to happen.  If the Contractor goes bankrupt and leaves you with a half-finished building, it's going to cost you way more than twice the cost to bring in a new contractor to complete it.

It's just that it usually instantiates through bitter negotiations over every Goddamn thing all through the job, and having to watch the work like a hawk to make sure they're not cutting corners twice to avoid losing their shirt.  Simple minor oversights or changes on either side are normally handled easily, but become points to try to make up the deficit in the bid.  "Oh, there's no medium blue paint that you wanted available.  Sorry, but the light blue paint will be an additional $240,000."

When a Contractor does this intentionally, it's colloquially called "bid it low, make it grow".

[CatCube]

MY current project has been going on for a couple of months, and the customer still hasn't approved what language will be used, much less any functional requirements. There's way too many cooks in their kitchen, but none of them want to actually approve anything, and the only thing they can all agree on is that it's due in December. My team is almost to the point of just starting work without any approval.

I hate that I'm often on the other side of this dynamic.  We've had things that just take forever to get approvals for and get an answer to our contractors.  Like you said, there's often too many people that have to hack off on a decision.

[euler]

MY current project has been going on for a couple of months, and the customer still hasn't approved what language will be used, much less any functional requirements. There's way too many cooks in their kitchen, but none of them want to actually approve anything, and the only thing they can all agree on is that it's due in December. My team is almost to the point of just starting work without any approval.

I hate that I'm often on the other side of this dynamic.  We've had things that just take forever to get approvals for and get an answer to our contractors.  Like you said, there's often too many people that have to hack off on a decision.

Honestly, this is how most professional services contracts end up going, in my experience. It's rare that the consultee has all their ducks in a row. Every one time out of ten or so they do, and the project goes off without a hitch and I'm convinced that's why people think consultants are a good idea. The other 9 times it's a disaster.

[bobobob]

Now my question is, why would the government accept such a low bid, when it's clear that the project will cost a million dollars more than estimated? Is it because the government functionary at the starting end of the transaction can take immediate credit for saving money, since he won't be around when his replacement two years down the road has to disburse more money? Or is the government legally required to take the low bid, if that bid meets all the minimal requirements for credibility?

[Lord Nelson]

Every project I've worked on at my current job has imploded in slow motion. The people in charge of estimating the cost and schedule keep severely underestimating both of them. Their number one goal seems to be to keep the customer happy, and if that means promising deadlines that are not realistic, so be it. (Never mind that the customer is not happy when that deadline inevitably slides.) There are some other bad management decisions going on, but a good 80% of our problems could be solved if the people in charge were less optimistic about how quickly and efficiently a project this size can be completed.

For a while I destroyed my mental and physical health trying to meet the impossible deadlines, but when it became clear that nothing was going to change, I decided "screw it, I'm not doing that anymore". I'll put in my 40 hours per week and get my paycheck, but unless my work specifically is holding something up, I refuse to do overtime.

The turnover rate on my team is ridiculously high because of this. Sometimes I think of leaving, but I genuinely like the product we're making, and don't want to get stuck on a program where I have no interest in the final product.

[clutzy]

Now my question is, why would the government accept such a low bid, when it's clear that the project will cost a million dollars more than estimated? Is it because the government functionary at the starting end of the transaction can take immediate credit for saving money, since he won't be around when his replacement two years down the road has to disburse more money? Or is the government legally required to take the low bid, if that bid meets all the minimal requirements for credibility?

My dad just finished a stint as supervisor of a local entity. They had a lot of roads under their jurisdiction, and they'd take bids for everything. Even something like a salt delivery contract. Vendors have to apply to become approved vendors for any contract, and their particular rule was that you had to have a performance bond equal to the government estimate regardless of you underbidding it. Also, the vetting process made it so no project realistically would bankrupt any of the long-time vendors.

This other guy, was running another part of the department (its a weird two headed leadership system), was an asshole and bypassed the bidding process for a bunch of stuff. This resulted in a bunch of screw ups, including, for example, paying 3x normal cost for salt and it not getting delivered on time. Meaning they had to order emergency salt. That guy just barely escaped charges from the State's attorney a few months ago. Big no no.

[CatCube]

Now my question is, why would the government accept such a low bid, when it's clear that the project will cost a million dollars more than estimated? Is it because the government functionary at the starting end of the transaction can take immediate credit for saving money, since he won't be around when his replacement two years down the road has to disburse more money? Or is the government legally required to take the low bid, if that bid meets all the minimal requirements for credibility?

The second one.  If eight raccoons in a trench coat pinky-swear they can do the work as described, we're legally obligated to pretend that we believe that.  We have less of the former, because our turnover isn't that high, and most of the people on a job at the beginning will be on it at the end.  This one is a short timeline, so it's even less applicable.

There is actually a process to disqualify a bid that's not "responsible" but I've never gotten a straight answer as to what exactly that is.  I've heard it gets easier if the bid is less than 75% of the estimate, but I'm not sure that's a hard line.  Despite my hyperbole in the previous paragraph, I think that if they, say, just straight up didn't have a required certification that can be a reason to disregard (for example, we say something has to be welded by somebody qualified by the American Welding Society to AWS D1.5 standards, and they don't have anybody certified).  However, I think these have to be very objective, to avoid looking like we're steering work to a buddy.  Technically, the job hasn't been awarded yet.  The opaque contracting black box has yet to formally award the contract--this really is only the "apparent low bidder" at this point.

To be fair, this is me bitching.  The winning bid is by a company that has done great work on jobs I've worked with them before, so maybe they've seen some efficiencies that we didn't account for.  However, they were very close, but below another company that is Known Incompetent.  (The KI company, on a previous job, told our QA rep, "[OurGuy], I told you before, I didn't read the contract before I signed it!" as an excuse for why they weren't doing something required.)

There are other processes to select a non-low bidder, but we Absolutely Had to Have This Awarded By the End of the Fiscal Year, because the money turns into a pumpkin on the first of October, and this project absolutely cannot slip--it's tied to a bunch of planned work by others.

Also, the other source selection methods have their own problems besides taking longer.  We can make them give us a proposal and rate that, balancing the cost against the quality apparent from that proposal.  However, you can still get bidders that write a great proposal but suck at the work.  You also still have the "we have to have objective criteria" problem.  For example, on a job I was working on some years back, we had bidders give us proposals (called Best Value Trade Off--BVTO--compared to just going with the lowest bidder, called Invitation for Bid, or IFB).  As part of BVTO, you have to give bidders a Source Selection Plan (SSP).  This was for a job of about $1mm, and as part of it their overall proposal the SSP said to provide abstracts for three previous jobs that were similar and at least $400,000.

One bidder, that we had worked with in the past and that we knew could do the work, and had the lowest cost of the four we were evaluating, gave us two projects of over that amount and one project that was about $350,000.  Our lawyer told us that we had to disqualify them.  When we said they could do the work based on our own knowledge, and their bid was quite a bit lower, the conversation went like this: "How many jobs did you ask for?" "Three." "And how much do those jobs have to be worth?" "At least $400,000."  "And how many jobs above that value did they give you?"  "Two"  "There you go.  They're disqualified."

The process is designed to appear to be fair, not to produce the people best able to perform the work.  Even though we realized in hindsight that our criteria could be relaxed, we weren't allowed to do that.  We can't change the "grading rubric" after the fact.  This means that we could spend a lot of time and money on the selection process--and requiring a lot of money from the bidders, as a good rule of thumb is that each BVTO proposal takes a bidder $20,000 to generate--and still get a dud.  There's been a push to swing back to lowest bidder because of that.

[Garrett]

This other guy, was running another part of the department (its a weird two headed leadership system), was an asshole and bypassed the bidding process for a bunch of stuff. This resulted in a bunch of screw ups, including, for example, paying 3x normal cost for salt and it not getting delivered on time. Meaning they had to order emergency salt. That guy just barely escaped charges from the State's attorney a few months ago. Big no no.

Was this corruption or incompetence? I suspect that incompetence would be much harder to prosecute.

[clutzy]

This other guy, was running another part of the department (its a weird two headed leadership system), was an asshole and bypassed the bidding process for a bunch of stuff. This resulted in a bunch of screw ups, including, for example, paying 3x normal cost for salt and it not getting delivered on time. Meaning they had to order emergency salt. That guy just barely escaped charges from the State's attorney a few months ago. Big no no.

Was this corruption or incompetence? I suspect that incompetence would be much harder to prosecute.

Reality is no one could know. The guy was such an idiot that incompetence is plausible. He's also so connected to the bidder so is corruption plausible.

[Erusian]

The second one.  If eight raccoons in a trench coat pinky-swear they can do the work as described, we're legally obligated to pretend that we believe that.  We have less of the former, because our turnover isn't that high, and most of the people on a job at the beginning will be on it at the end.  This one is a short timeline, so it's even less applicable.

There is actually a process to disqualify a bid that's not "responsible" but I've never gotten a straight answer as to what exactly that is.  I've heard it gets easier if the bid is less than 75% of the estimate, but I'm not sure that's a hard line.  Despite my hyperbole in the previous paragraph, I think that if they, say, just straight up didn't have a required certification that can be a reason to disregard (for example, we say something has to be welded by somebody qualified by the American Welding Society to AWS D1.5 standards, and they don't have anybody certified).  However, I think these have to be very objective, to avoid looking like we're steering work to a buddy.  Technically, the job hasn't been awarded yet.  The opaque contracting black box has yet to formally award the contract--this really is only the "apparent low bidder" at this point.

To be fair, this is me bitching.  The winning bid is by a company that has done great work on jobs I've worked with them before, so maybe they've seen some efficiencies that we didn't account for.  However, they were very close, but below another company that is Known Incompetent.  (The KI company, on a previous job, told our QA rep, "[OurGuy], I told you before, I didn't read the contract before I signed it!" as an excuse for why they weren't doing something required.)

There are other processes to select a non-low bidder, but we Absolutely Had to Have This Awarded By the End of the Fiscal Year, because the money turns into a pumpkin on the first of October, and this project absolutely cannot slip--it's tied to a bunch of planned work by others.

Also, the other source selection methods have their own problems besides taking longer.  We can make them give us a proposal and rate that, balancing the cost against the quality apparent from that proposal.  However, you can still get bidders that write a great proposal but suck at the work.  You also still have the "we have to have objective criteria" problem.  For example, on a job I was working on some years back, we had bidders give us proposals (called Best Value Trade Off--BVTO--compared to just going with the lowest bidder, called Invitation for Bid, or IFB).  As part of BVTO, you have to give bidders a Source Selection Plan (SSP).  This was for a job of about $1mm, and as part of it their overall proposal the SSP said to provide abstracts for three previous jobs that were similar and at least $400,000.

One bidder, that we had worked with in the past and that we knew could do the work, and had the lowest cost of the four we were evaluating, gave us two projects of over that amount and one project that was about $350,000.  Our lawyer told us that we had to disqualify them.  When we said they could do the work based on our own knowledge, and their bid was quite a bit lower, the conversation went like this: "How many jobs did you ask for?" "Three." "And how much do those jobs have to be worth?" "At least $400,000."  "And how many jobs above that value did they give you?"  "Two"  "There you go.  They're disqualified."

The process is designed to appear to be fair, not to produce the people best able to perform the work.  Even though we realized in hindsight that our criteria could be relaxed, we weren't allowed to do that.  We can't change the "grading rubric" after the fact.  This means that we could spend a lot of time and money on the selection process--and requiring a lot of money from the bidders, as a good rule of thumb is that each BVTO proposal takes a bidder $20,000 to generate--and still get a dud.  There's been a push to swing back to lowest bidder because of that.

See, from the other side conventional wisdom is that the key stakeholder is the bureaucrats. No one violates the rules and there's nothing like direct quid pro quo that I've dealt with. The rule is no more than $20 worth of stuff and no meals. So you invite them into a nice, comfortable building for a presentation with cupcakes or something. (There are entire bakeries in DC who I could swear hang their business on just this.) This isn't just an excuse for a bribe: you really are trying to convince them. The presentation has the goal of convincing them your plan is the most realistic/best value for money/etc with the idea they'll go to bat for you. But every government contractor I've talked to has said that personal relationships with bureaucrats is key to getting contracts awarded. Government contractors even have outside salespeople who try to cultivate relationships with bureaucrats just like in B2B sales.

Unless I'm wildly mistaken, this seems to work a lot better than blind bidding.

What I am more suspicious of is there's an entire industry in DC of people who do bid writing. An implicit (sometimes even explicit) part of the deal is that they'll work their connections. They didn't seem to outperform the people who just wrote the RFP and put in the legwork to meet the bureaucrats. On the other hand, they seem to have a bigger influence in some bureaucracies than others.

My impression of your average bureaucrat's power is the opposite of Russia's: more than they think, less than you think. Once they want something they tend to ask whether the rules stop it rather than if it's absolutely the platonic ideal of procurement (which they consider stupid). That said, the only way to get them to want something is to convince them by persuasion (and maybe some really good donuts) or to do something illegal.

And the US government really is non-corrupt in the formal, follow the rules sense. What instead goes on is backscratching and informal influence peddling. But anyone who breaks a rule is, in my experience, found out sooner or later and jailed. And those rules prevent the most obvious and egregious abuses like direct bribery. This is very much not my experience elsewhere with a few exceptions. Europe/Canada tends to get ruled by informal elite networks even more. A lot of other countries tolerate a lot of actually illegal corruption. A lot of places have a very strong culture of taking bureaucrats out that the US rules seems to completely prevent.

[SamChevre]

See, from the other side conventional wisdom is that the key stakeholder is the bureaucrats. No one violates the rules and there's nothing like direct quid pro quo that I've dealt with. The rule is no more than $20 worth of stuff and no meals. So you invite them into a nice, comfortable building for a presentation with cupcakes or something. (There are entire bakeries in DC who I could swear hang their business on just this.) This isn't just an excuse for a bribe: you really are trying to convince them. The presentation has the goal of convincing them your plan is the most realistic/best value for money/etc with the idea they'll go to bat for you. But every government contractor I've talked to has said that personal relationships with bureaucrats is key to getting contracts awarded. Government contractors even have outside salespeople who try to cultivate relationships with bureaucrats just like in B2B sales.

Unless I'm wildly mistaken, this seems to work a lot better than blind bidding.

What I am more suspicious of is there's an entire industry in DC of people who do bid writing. An implicit (sometimes even explicit) part of the deal is that they'll work their connections. They didn't seem to outperform the people who just wrote the RFP and put in the legwork to meet the bureaucrats. On the other hand, they seem to have a bigger influence in some bureaucracies than others.

My impression has been that relationships with the bureaucracy and the bureaucracy-influencers doesn't buy you very much direct influence: what it buys is information about what is key, what words work best, and so on.  Like the "three $400,000 contracts" language: a pro wouldn't be able to get them to accept "two $400,000 and one $350,000", but could point out that "you know, $400,000 is a real limit, but 'contract' is a flexible term--you can include the change-orders to get the value over $400,000".