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Tippecanoe Watch #3: We Bid You Good DayDecember 10, 2008 by John Kelly
Last time JJ Today checked with Tippecanoe County, in October, the economy had recently hit the skids. Proponents of a new juvenile justice center nervously awaited a November meeting between the county and its bond rater in New York to discuss Tippecanoe's ability to finance the facility. Good news would mean a final green light to the project; bad news would put the whole thing in jeopardy.
Well, it appears that decades of fiscal prudence have paid off for the county, which by all accounts has been diligent and conservative about the use of bonds for public projects. The meeting reportedly went well, says Rebecca Humphrey, executive director of youth services for Tippecanoe, although she stopped short of saying a favorable bond rating was a done deal.
But the county has purchased the land and the financial ducks are in a row, so the focus now shifts from planning to building.
Once the finances are finalized (a bond rating could come as early as Friday), the next major step will be fielding bidders to work on the construction of the center. Some counties handle that process themselves, while others use construction managers (CMs) to oversee the projects.
Tippecanoe went the latter route; it has an agreement with Kettelhut Construction, based in Lafayette, to manage the project. JJ Today spoke with Kettelhut President Steve Habben to get an idea of how a bid process for a JJ facility works.
How it Works
Kettelhut signed on to manage it in March for approximately $400,000. The standard fee, Habben says, is 2.5 percent to 3 percent of the projected construction costs. (The center's expected construction cost is around $14 million, which does not include the costs associated with financing, which brings it to about $17.3 million.)
Habben says that in his experience, about half of counties go with a CM. The idea is that using a firm like Kettelhut saves hours of county employee time. A CM with expertise should be able to find enough cost-savings in the planning phases to neutralize the cost of hiring them in the first place.
Habben's advice: Counties are usually better off as their own general contractor unless there is an obvious choice for a CM. Kettelhut has been around for 75 years, it's based in the county. The firm has done construction on a number of public buildings and served as CM on another secure building (an addition to the county jail).
Before construction, the county receives Kettelhut's input and assistance on design and oversight of the bidding. Once ground breaks, "we are basically the eyes for the owner" to make sure contractors provide what they offered, Habben says.
The design of the facility, save a few tweaks along the way, is done; that will be the focus of our next update. Now, let the bidding begin.
There will be 10 primary contractors working on the juvenile justice center in the following categories:
-general construction (earth work, concrete, any doors or woodwork)
About 160 construction companies picked up documents at a Nov. 20 meeting for potential bidders, and Habben estimates that there will be between four to five contractors that seriously compete in each category. (It's possible that one firm would bid on more than one.) Kettelhut will not bid on this center, which is the widely-held ethical standard when it comes to serving as a CM.
JJ Today was curious how the bidding system ferrets out absurdly low bids. Simple, Habben says. First, if a firm bids too low, then has to renegotiate, that firm has to fork over about 5 percent of what it originally bid as a penalty. If it's an honest mistake, most bid managers will just let a firm pull out.
It's rare that a bid gets rejected, according to Habben, because it would be hard for a contractor to even make a bid without some legitimacy. Most JJ facility construction projects, if not all, are bonded jobs, meaning the bidder would come to the table with a bonder ensuring that the work will be done. A bonder is on the hook if someone it backs goes bankrupt in the middle of the project or cannot finish it for some other reason. If it costs more than the bidded amount to finish the project, the bonder "just eats it," Habben says. "That has happened a lot lately. So you have to know what you're doing" just to get a bond.
Bidders must also submit extensive qualification information to Kettelhut, he explains. If Kettelhut or the county have had a bad experience with a firm, it might get rejected, or the records would have to include lots of claims filed against them.
"You have to be prepared that, if you reject contractor X, they have the legal right to sue," Habben explains. And construction is "a sue-happy world."
Bids on the center will all be submitted by Dec. 11, and the county councilmen and commissioners will immediately begin reviewing them. That will provide Kettelhut and county officials with their first look at what private industry thinks it will cost to profitably provide services on the project.
If the winning bids add up to a figure near the projected costs of the project, things should proceed nicely. If not - let's say bidders factor in a higher cost of materials than the county had expected - it may mean a trip back to the drawing board for the center.
***UPDATE: There were 67 bids received on the project. Ruth Shedd, one of the county commissioners, says here that the costs could actually be lower than expected.
Note: The Journal & Courier, which has diligently followed the juvenile justice center plans, ran this great timeline on its website, which chronicles the ever-changing cost projections of the juvenile justice center from 2004 to present.
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