HomeMy WebLinkAbout8.a. Receive Bids/Award Contract-East Side Watermain Phase 2, City Project #345CITY OF ROSEMOUNT
EXECUTIVE SUMMARY FOR ACTION
'CITY COUNCIL MEETING DATE: May 6, 2003
AGENDA ITEM: Receive Bids /Award Contract - Eastside Watermain
Phase 2, City Project #345
AGENDA SECTION:
Old Business
PREPARED BY: Andrew J. Brotzler, P.E., City Engineer
AGEN 8
ATTACHMENTS: Resolution
APPROVED BY:
Bid Tabulation Summary
Contractor's Edge, Inc. Letter dated 3/14/03
Leonard, Street and Deinard Letters dated 4/14/03,
4/16/03 and 4/17/03
City Attorney Letter's dated 4/09/03 and 4/30/03
BACKGROUND: At the April 17, 2003 Regular City Council meeting, bids for the above - referenced project
were presented to Council for Council consideration. As previously discussed, the low bid submitted for the
project by Three Rivers Construction, Inc. in the amount of $935,792.50 included an irregularity in the bid
proposal as submitted by failing to acknowledge receipt of an addendum. Following the bid opening on March
14, 2003, the second low bidder, Contractor's Edge, Inc., with a bid amount of $940,738.00, submitted the
attached letter to the City requesting that the City acknowledge the irregularity in the bid submitted by Three
Rivers Construction by rejecting the bid and awarding the contract to Contractor's Edge, Inc. as the lowest
responsible bidder.
Based on the letter received from Contractor's Edge, Inc. of their intent to challenge an award of the contract to
Three Rivers Construction, Inc., the City Attorney determined as outlined in the attached April 9, 2003 letter, that
action by Council to waive the irregularity in the bid submitted by Three Rivers Construction, Inc. and award the
contract to Three Rivers Construction could result in a temporary restraining order against the project, essentially
delaying the commencement of the project for an indefinite period of time. The City Attorney's April 9, 2003
letter also noted that the rejection of the low bid submitted by Three Rivers Construction, Inc. due to the
irregularity and awarding the contract to the second low bidder, Contractor's Edge, Inc. could result in a claim
being filed against the City by Three Rivers Construction, Inc., but that the City would be in a defensible position
to address this claim. The third alternative available to Council as noted would be the rejection of all bids and re-
bidding of the project with the impact of this alternative being a delay in the project schedule and the potential for
new bids to be higher.
Following a presentation to the Council by Three Rivers Construction, Inc. and their representatives and
discussion of this item by Council, Council tabled the item and Staff was directed to prepare estimates of cost
associated with each alternative.
SUMMARY: As previously directed, Staff and the City Attorney have prepared estimates of costs
associated with each alternative action for Council consideration as shown in the attached letter from the City
Attorney dated April 30, 2003. Based on this and the previous discussion, following is summary of the
alternative actions for Council consideration:
1. Waive the irregularity in the bid submitted by Three Rivers Construction, Inc. in the amount of
$935,792.50 and award the contract to Three Rivers Construction, Inc.
Council action to approve this alternative may result in a claim being filed against the City by
Contractor's Edge, Inc. and a temporary restraining order placed on the project, delaying the
commencement of the project for an indefinite period of time. The estimated costs to process a claim is
shown in the April 30, 2003 letter from the City Attorney.
2. Reject the low bid submitted by Three Rivers Construction, Inc. due to an irregularity and award the
contract to Contractor's Edge, Inc. in the amount of $940,738.00.
Council action to approve this alternative would result in an increased contract amount of $4,942.50, the
difference between the bids submitted by Three Rivers Construction, Inc. and Contractor's Edge, Inc. As
noted in the April 9, 2003 letter from the City Attorney, action by Council to approve this alternative
could result in a claim being filed by Three Rivers Construction, Inc. However, it was noted that in the
opinion of the City Attorney, the City would be in a position to successfully defend this claim.
3. Reject all bids and authorize re- bidding of the project.
Per the bid documents, the City has the legal right to reject all bids and re -bid the project. Council action
to approve this alternative will delay the project 4 to 6 weeks and may result in new bids being higher than
the current bids but eliminates the potential for a claim being filed against the project. The estimated cost
associated with re- bidding the project is $2,500.00 to $3,000.00.
Based on the issues associated with Alternatives 1 and 2, Staff is recommending Council consideration of
Alternative 3.
RECOMMENDED ACTION: MOTION TO ADOPT A RESOLUTION REJECTING ALL BIDS AND
AUTHORIZING THE RE- ADVERTISEMENT FOR BIDS FOR EAST SIDE WATERMAIN PHASE 2
IMPROVEMENTS, CITY PROJECT #345.
COUNCIL ACTION:
CITY OF ROSEMOUNT
DAKOTA COUNTY, MINNESOTA
RESOLUTION 2003 -
A RESOLUTION REJECTING ALL BIDS
AND AUTHORIZE READVERTISING THE CONTRACT FOR
EAST SIDE WATERMAIN PHASE 2 IMPROVEMENTS
CITY PROJECT #345
WHEREAS, the City Council of the City of Rosemount had ordered the Advertisement for Bids for East Side
Watermain Phase 2 Improvements, City Project #345 and such bids were opened and read aloud publicly on
March 14, 2003; and
WHEREAS, because of a discrepancy in the low bid and threatened challenges to the bidding process that
could delay the project, the Council has determined that it is in the public interest to reject all bids and
readvertise.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Rosemount, Minnesota:
1. All bids are hereby rejected
2. The City Clerk shall prepare and cause to be inserted in the official City newspaper and the
Construction Bulletin a re- advertisement for bids upon the making of such improvements under such
approved plans and specifications for City Project #345.
3. The advertisement shall be published in each of said publications at least once not less than three (3)
weeks before the date set for opening bids, shall specify the work to be done, shall state the bids will
be publicly opened as soon as possible at the Rosemount City Hall in said City and that no bids will be
considered unless sealed and filed with the City Clerk and accompanied by a cash deposit, cashier's
check, bid bond or certified check payable to the City Clerk for five (5 %) percent of the amount of
such bid.
ADOPTED this 6 th day of May, 2003.
William H. Droste, Mayor
ATTEST:
Linda Jentink, City Clerk
Motion by:
Seconded by:
Voted in favor:
Voted against:
APR -09 -2003 16:35 WSB 8 ASSOCIATES INC.
PROJECT:
Eastside Watermain Phase II and Appurtenant Work
City of Rosemount Project No. 345
LOCATION:
Rosemount, MN
WSB PROJECT NO(S).:
1402 -00
Bids Opened: Friday, March 10., 2003, 10:00 a.m.
7632877170 P.06i24
Engineer's Opinion of Cost $1
I hereby certify that this is a true and correct tabulation of the bids as r9celved on March 14, 2003.
Kevin B. Kav#lewski, P.E.,
'" Denotes corrected figure
Contractor
Addendums Aec'd.
Bid Security
Total Bid
1
Three Rivers Construction, Inc,
X
$935,792.50
2
Contractors Edge, Inc.
X
X
$940,738.00
3
Redstone Construction Company, Inc.
X
X
$946,930.03
4
Municipal Contracting Services
X
X
$949,397.00'=
5
A -1 Excavating, Inc.
X
X ,
$950,079.00
6
Heselton Construction, LLC
X
X
$975,964.00
7
Barbarossa and Sons, Inca
X
X
$983,265.00"'
8
Ryan Contracting Co,
X
X
$998,970.50
9
Surschville Construction, Inc.
X
X
$1,008,577.50
10
Utility Systems of America, Inc.
X
X
$1,015,957.50
11
Northdale Construction Company, Inc.
X
X
$1,024,201.33
12
Park Construction Company
X
X
$1,052,031.96
13
Veit & Company, Inc.
X
X
$1,059,291.00
14
Friedges Contracting Company, LLC
X
X
$1,063,718.37"
15
Owatonna Construction CO., Inc.
X -
X
$1,067,584.50
16
Arcon Construction Company, Inc.
X
X
$1,092,027.70
17
Hydrocon, Inc.
X
X
$1,166,000.00
18
Hoist Excavating, Inc.
X
X
$1,214,180.00
Engineer's Opinion of Cost $1
I hereby certify that this is a true and correct tabulation of the bids as r9celved on March 14, 2003.
Kevin B. Kav#lewski, P.E.,
'" Denotes corrected figure
03/14/2003 FRI 15;48 FAX 15072783650 Contractors Edge, Igc�.
�tTaclboIrS 1'6511 563 Avenue
' Good Thunder, MN 58037
E&je (507) 278 -4446 • Fax (507) 278 -3650
www.Contrac;torsEdge.net
i
March 14, 2003
VIA FACSIMILE & U.S. MAIL
Linda Jentink, City Clerk
City of Rosemount
2875 145 "' Street West
Rosemount, MN 55068
0
RE: Eastside Watermain Phase I! and Appurtenant Work C Y 3 4!5"
Dear Linda Jentink:
This letter is written requesting that the City of Rosemount award the Eastside
Watermain Phase II Project to Contractors Edge,, Inc., the lowest responsive,
responsible bidder. The bid opening was today and the apparent low bidder
failed to acknowledge an addendum. The. failure to acknowledge an addendum
in a public bid deems the bid nonresponsive and, the City of Rosemount should
reject the bid.
The failure to acknowledge an addendum is not ,a `minor informality that can be
waived. See etc ., Duininck Bros.. Inc. v. State' of Minnesota No. C3 =97 -972,
1997 WL .729233 (Minn: App: Nov. 25, 1997). IN Duininck, the Minnesota Court
of Appeals allowed the State of Minnesota to reject the apparent low bidder for
failure to acknowledge an addendum costing about $13,000 to $14,000 on a
project in excess of .$2 million. c
Here, like in Duininck the failure to acknowledge an addendum is a material
defect that cannot be waived by the City of Rosemount. Also, the cost differential
between Contractors Edge, Inc. and the apparent low bidder is minimal.
Please -let me know if you will be rejecting the apparent low bidder's bid for the
failure to.acknowledge the addendum. If the City of Rosemount chooses to
award the project to Three Rivers,' Contractors Edge, Inc. will immediately act to
protect its rights under Minnesota law and will submit a bid protest.
Please note that my goal is to resolve this matter cooperatively and allow the
work to proceed. Because time is of the essence -in this matter, please confirrn
today whether you will be rejecting Three Rivers' bid.
NO2 /003
03/1,4/2003 FRI 15:48 FAX 15072783650 Contractors Edge, Inc; &03/003
Please do not hesitate to call me if you have any questions or comments with
respect to this letter. Thank you for your prompt attention to this important
matter. I look forward to hearing from you.
Very truly your ,
John Br►ndley
President
r
03/1.4/2003 FRI 15:48 FAX 15072783650 Contractors Edge, Inc;,
m
m
16511 563 Avenue
Edso, IfiC. Good Thunder, MN 56037 _ c
(50'7) 278 -4446 • Fax (507) 278 -3650
Mm.ContractorsEdge.net
FAX COVER SHEET
Z001/063
T o: Company: U► �� OC1Y�
Fax Number:
From:
.. I 1 . .a .
Number of Pages (including cover sheet):;
APP, -14 -2003 13:38 WSB & ASSOCIATES 7635411700 P.01iO4
FROM LEONARD STREET & DEINARD (MON) 4. 14' 03 13:36/ST, 13:29/N0, 4261040754 P 1
LUONAR,D, STREET AND DEINARD
PROFESSIONAL ANWCIATION
150 SOUTH FIFTH STREET SUITE 2300 MINNEAPOLIS, MINNESOTA 55402
TE1. 612- 335 -1500 FAx 612- 335 -1657
LAW OFFICES IN MINNEAPOLIS, SAINT PAUL, AND MANKATO
FACSIMILE TRANSMITTAL LETTER
CONFIDENTIALITY NOTE: The information contained in this telecopy message is being transmitted to and is intended only
for the use of the individual named below. If the reader of this is not the intended recipient, you are hereby advised that any
dissemination, distribution or copy of this telecopy is strictly prohibited, if you have received this telecopy in error, please
immediately notify us by telephone and destroy this telecopy message.
Date of Transmittal: April W, 2003
Recipients: See Below
Name /Company i Facsimile No. Telephone No.
Kevin K.awlewski/WSB 7b3 -541 -4800 763 -541 -1700
Sender's Name: Bob Huber 388
Sender's Number: 612- 335 -1714
Client/Matter Numbers: 56148-00001
COMMENTS:
IF YOU ARE HAVING PROBLEMS RECEIVING OR TRANSMITTING, PLEASE CALL: 612 - 335 -1760,
Return original to: J. Mesenbring/22
Sentby. ......... ... ................... I.......
Date: ......................
Time: ........ ....I ..........................
Notified sender: ........ ...............................
APR -14 -2003 13:38 WSB & ASSOCIATES 7635411700 P.02iO4
FROM LEONARD STREET & DEINARD (MON) 4. 14' 03 13:36/ST, 13:29/NO. 4261040754 P 2
LEONARD, STREET AND DEINARD
PROFEsS10NAL ASSOCIATION
April 14, 2003
BY FAX ONLY
Kevin B. Kawlewski, P.E.
WSB & Associates, Inc.
4150 Olson Memorial Highway, Suite 300
Minneapolis, MN 55422
Re. Eastside Watermain Phase Hand Appurtenant Work
City of Rosemount
City Project No. 345
WSB ,Project No. 1402 -00
Dear Mr. Kawlewski:
Robert J. Huber
612 -335 -1714
BobAuber@leonard.com
1 am writing on behalf of Three Rivers Construction to explain why its bid's failure to acknowledge
the bid addendum was a minor, waivable irregularity.
1. The Addendum
On March 7, you faxed to all planholders the bid's only addendum, Addendum No. 1. The
addendum did three things. First, it corrected two typographical errors in Section 02622. Here is
the corrected provision (red. -lined to show the changes):
4 -inch Rm port pressure reducing and pressure sustaining valve (Cla Val Model 692-
29 or Golden Anderson Valve 4700). It shall be a "I 50 -pound flanged globe valve
with stainless steel rim material including seat, guide bearing and disc guide and the
following adjustment range options:...."
Both revisions are technical, no -cost changes and were undoubtedly included in the addendum in
response to remarks from Cla Val valve distributor, who simply wanted to make sure that you were
properly describing the valve and so eliminate any remote possible challenge to the use of the Cla
Val 92 -29 valve.
The second part of the addendum is also a technical, no -cost change. It simply stated a performance
characteristic that the two specified models already had (or they would not have been named):
"Valve control for the 16 -inch and 4 -inch valve shall be capable of converting to future remote
electric operation for both pressure reducing and sustaining and remote indication of valve
position." This allowed other valve manufacturers to know what performance requirements a
proposed substitute must meet.
150 SOUTH FIFTH STREET SUITE 2300 MINNEAPOLIS, M1NNUSOTA 55302 TEL 612 - 1500 rAx 612 -335 -1657
LAW OFFICES IN MINNEAPOLIS, SAINT PAUL, MANKATO. SAINT CLOUD AND WASHINGTON. u,C•
APR -14 -2003 13:39
FROM
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LEONARD STREET & DEINARD
April 14, 2003
Page 2
WSB & ASSOCIATES 7635411700 P.03iO4
(MON) 4. 14' 03 13: 37 /ST. 13: 29 /NO. 4261040754 P 3
The third part of the addendum is yet another technical, no -cost change. The landscaping work was
already required by the plans, and the project manual included a landscaping specification
(referenced in the addendum). The bid also included prices for the landscaping. Though it was
already clear that landscaping was part of the contract's scope of work, the addendum was simply to
make sure that no one could even try to argue otherwise.
2. Three Rivers Acknowledged Receipt of the Addendum Beforiz Bidding
Importantly, Three Rivers acknowledged receipt of this addendum before submitting its bid. In
your fax cover sheet, you asked bidders to "[p]lease acknowledge receipt of this addendum by
signing this form and returning via fax immediately after receiving, ...." (Emphasis in original.)
Your cover sheet included a signature line for the acknowledgment. Von Bergstrom of Three
Rivers signed the acknowledgment line and returned it to you by fax on March 10, four days before
bids were opened. There is no question that Three Rivers received the addendum.
3. The City's Attorney Recommended Not To Award to Three Rivers
After bids were opened on March 14, you notified Three Rivers that its bid contained an
"irregularity," the failure to acknowlc dge receipt of the addendum, and that the City's attorney was
reviewing the bids for the purpose of making a recommendation to the City. On April 8, you
notified Three Rivers that the City's attorney had recommended award to the second low bidder
"because acknowledgment of receipt of Addendum No. 1 was not indicated on the proposal form."
4. A Failure to Acknowledge an Addendum is Waivable if Addendum is Not Material
Your April 8 letter also told Three Rivers that it has the opportunity to address the city council at its
April 17 meeting. Rather than wait till then to state its position to the City, Three Rivers has asked
me to explain why the City his the discretion to award the contract to Three Rivers.
In the Instructions to Bidders, the City informed bidders that it would award the contract to "the
lowest responsive, responsible bidder" but reserved "the right to waive any and all informalities' in
any of the bids. The City, therefore, has the discretion to waive minor irregularities in the bids on
this project. Electronics Unlimited, Inc. v. Village of Burnsville, 182 N.W.2d 679 (Minn. 1971).
An irregularity is minor if it does not affect price, quality, quantity, manner of performance, or
other things that go into the actual determination of the amount of the bid. Griswold v. Ramsey
County, 65 N.W.2d 647 (Minn. 1954). The test of an irregularity's materiality is `whether it
gives a bidder a substantial advantage or benefit not enjoyed by other bidders." Coller v. City of
St. Paul, 26 N.W.2d 835, 840 (Minn. 1947).
Not all addenda are material requiring bid rejection if not acknowledged. The failure to
acknowledge a bid addendum is a waivable irregularity if the addendum (1) eases performance,
(2) increases costs by only a negligible amount, or (3) is purely technical without a cost impact. See
Paul Shnitzer, GOVERNMENT CONTRACT BIDDING, at 11 -28 - -11 -31 (Fed. Pub., 3d, ed.
1992) (citing numerous decisions); Richard J. Bedmar, et al, CONSTRUCTION CONTRACTING,
at 101 -04 (Geo. Wash. U. 1991); see, e.g., Grade -Way Constr. v. United States, 7 Cl. Ct. 263,268-
233002vi
APR -14 -2003 13:39
FROM
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WSB & ASSOCIATES 7635411700 P.04iO4
LEONARD STREET & DEINARD
April 14, 2003
Page 3
(MON) 4. 14' 03 13:37/ST. 13:29/N0.4261040754 F 4
70 (1985) (two addenda held non- material; one specified an assumed start date and noted that some
rights -of -way would not be immediately available, and the specified that "fat" clay could not be
used in embankment); Martel Constr. v. State. 668 P.2d 222 (Mont. 1983) (failure to acknowledge
bid addenda held waivable because cost of addenda work was less than the difference between the
low bid and the second low bid).
5. The City May Waive Three Rivers' Failure to Acknowledge the Addendum in the Rid
Applying these rules to the failure of Three Rivers to acknowledge the addendum in its bid, the City
should be convinced that the irregularity is minor and waivable. Addendum No. 1 was purely
technical and had no cost impact. Even if one could argue that there was a cost impact, and I cannot
imagine that anyone could, that impact is negligible.
Additionally, the City has absolute proof that Three Rivers received the addendum and was aware
of it, which totally eliminates any argument that Three Rivers had any advantage over other bidders.
On top of that, all of the valve manufacturers quoting to Three Rivers and other bidders had
certainly received the addendum and were quoting valves that conformed to the bid documents,
including the addendum, so there can be no question that the valves in the bid of Three Rivers were
as specified in the bid and addendum.
Though you cannot give a legal opinion on whether the City should reject the bid of Three Rivers,
you certainly can give an opinion on whether the addendum (1) eases performance, (2) increases
costs by only a negligible amount, or (3) is purely technical without a cost impact.. This is the
factual basis of the legal opinion on whether the City may waive the irregularity in the bid of Three
Rivers.
Please consider the matter, in consultation with the City's attorney. Perhaps with this information,
especially the City's proof of actual receipt of the addendum, the City's attorney may re- consider
his recommendation.
Enclosed for your convenience is a copy of the pre-bid acknowledgment of the addendum.
Thank you.
Sincerely,
O ;.Huber , STREET AND
R` er
cc: Andy Brotzler, City of Rosemount (by fax)
Charlie Le Fevere, Kennedy & Graven (by fax)
Von Bergstrom, Three Rivers Construction (by fax)
2336862YI
TOTAL P.04
I ■
FROM LEONARD STREET & DEINARD
t■
(WED) 4,16'03 11: 36 /ST. 11; 35/NO. 4261040912 F 1-
LEONARD, STREET AND DETNARll
PROFESSIONAL ASSOCIATION
150 SOUTH FIFTH STREET SUITE 2300 MINNEAPOLIS, MINNF_SnTA $5402
TEL 612- 335 -1500 FAX 612- 335 -1657
Law OFFICES 1N MrNNEArol.IS, SAINT PAUL, AND MANKATO
FACSIMILE TRANSMITTAL LETTER
CONFI.DENTIALIT'Y NOTE: The information contained in this telecopy message is hcing transmitted to and is intended only
for the use of the individual named below. If the readcr of this is not the intended recipient, you are hereby advised that any
dissemination, distribution or copy of this telecopy is strictly prohibitcd. If you hayc receivrd this telecopy in error, please
immediately notify us by tcicphone tend destroy this telecopy message.
Date of Transmittal: April 16, 2003
Recipients: See Below
Name /Company Fa
esimile No. Telephone No.
Andy Brotzl.er /City of Rosemount 651 -423 -5203 651- 322 -2025
i
Sender's Namc: Bob Huber 388
Sender's Number. 612- 335 -1714
Clicnt/Mattcr Nurnbcrs: 56148 -00001
IF YOU ARE HAVING PROBLEMS RECEIVING OR TRANSMITTING, ,PLEASE CALL: 612 -335 -1760.
Return original to: J. Mesenbring/22
Scnt by. .... ........
Date: .......
Time: ..... ...............................
Notified sender. ..................
FROM LEONARD STREET & DEINARD (WED) 4.16'03 11:36/ST,11:35/NO.4261040912 P 2
LEONARD, STREET AND DEINARD
PROFES510NAI. AssOCIATION
April 16, 2003
I
BY FAX ONLY
Kevin B. Kawlews1d, P.E.
WSB & Associates, Inc.
4150 Olson Memorial Highway, Suite 300
Minneapolis, MN 55422
Re: Eastside Watermain Phase II anal Appurtenant Work
City of Rosemount
City Project No. 345
Nt'SB Project No. 1402-00
Dear Mr.. Kawlewski:
Rubcrt J. Huber
612- 335 -1714
Bob.Huber@eonard.com
Enclosed is a copy of the pre -bid acknowledgment or the addendum which was 111advcrtently
ornitted from my letter to you of April 14.
Sincerely,
i ARD, STREET AND DEINARD
rt J. Huber
RJH/jm
i . Enclosure
i
cc: Andy Brotzler, City of Rosemount (by fax)
Charlie Le Fevere, Kennedy & Graven (by fax)
Von Bergstrom, Three Rivers Construction (by fax)
150 SOUTH FIFTH STAHHT SUITE 2300 MINNEAFOLI5, MINNESOTA 55402 TEL 612- 335.1500 FAX 612- 735.1657
2336142v1 LAW OFFICES IN MINNEAPOLIS, SAINT PAUL, MANI:ATO, SAINT CLOUD AND WASHINGTON, D.C.
FROM 'LEONARD STREET & DEINARD (WED) 4. 16' 03 11:36/ST. 11:35/N0, 4261040912 P 3
1 JAN.12.1995 7 :55AM NO.175 P.11i12
i
AomooJdkks, Ina
4150 01*M AfOMOdd fi►9h"Jn x!'.900
'B r LAY
- 041 -17M (IMI
ADDENDUM N_ v I
To: All Plan Holders
Date: March 7, 2003
From: Kevin KawleWsld, P.E.
Project Manager
AE: Eastside Watermain Phase 11
and Appurtenant Work
City of Rosemount Project NO. 345
W313 Project No. 1402-00
Number of pages including this cover page. 3
Please acknowledge receipt of this addendum by slaning this for
and returning via fax immediately after receiving, even It you are not
bidding on the project. Our fax number ia:
(7133) 541 -1700
Addendum No. 1 received by:
e. re w
Name
Company
3 - /D
Date
i+ IwvvrrAnt�n9lMl�pl7F+7V1�+rwkon 1 Au riv
rn iT n• fN7 Tr+. -,- c� urti o ah" oa.rY a ftmv'JZvu..
I■
;■ FROM LEONARD STREET & DEINARD
(THU) 4.17'03 15:01/ST. 15:01/N0, 4261040037 P 1
LEONARD, STREET AND DEINARD
PROFESSIONAL ASSOCTATIO14
150 SOUTH FIFTH STREET SUITE 2300 MINNEAPOLIS, MINNESOTA 55402
TEL 612 -335 -1500 FAX 612- 335 -1657
LAW OMCFS IN MINNEAPOLIS, SAINT PAUL, AND MANKATO
FACSIMILE TRANSMITTAL LETTER
CONFIDENTIALITY NOTE: The information contained in this telecopy message is being transmitted to and is intended only
for the use of the individual named below. If the reader of this is not the intended recipient, you are hereby advised that any
dissemination, distribution or copy of this telecopy is strictly prohibited. If you have received this telecopy in error, please
immediately notify us by telephone and destroy this telecopy message.
Date of Transmittal: April 17, 2003
Recipients: See Below
Name /Company Facsimile No. 'Telephone No.
Andy Brotzler /City of Rosemount 651- 423 -5203 651- 322 -2025
Sender's Name: Bob Huber 388
Sender's Number: 612- 335 -1714
Client/Matter Numb 56148 -00001
COMMENTS.
if YOU ARE HAVING PROBLEMS RECEIVING OR TRANSMITTING, PLEASE CALL' 612- 335 -1760.
Return original to: J. Mesenbring/22
Sentby: ...... .. . ........ I ........ .............
Date: ...... ...............................
Time: ........................
Notified sender: .......................................
FROM
I
i
r
LEONARD STREET & DEINARD (THU) 4,17'03 15:02/ST. 15:01/NO. 4261040037 P 2
LEONARD, STREET AND DEINARD
PRVFESSIONA6 ASSOCIATION
April 17, 2003
BY FAX ONLY
Kcvin B. Kawlcwski, P.E.
WSB & Associates, Inc.
4150 Olson Memorial Highway, Suite 300
Minneapolis, MN 55422
Re- Eastsrde Waiermlain Please 11 and Appuricawnt Work
City of Rosemount
City Project No. 345
WSB Project No. 1402 -00
Dear Mr. Kawlewski:
Robert J. Huber
612- 335 -1714
Bob - Huber @leonand.com
I am writing on behalf of Three Rivers Construction to provide further information after a
discussion with the City's attorney yesterday.
When 1 wrote my April 14 letter to you, my client was unaware that there was any difference
between the two valves. (The City's attorney, Charlie Lefevere, told me that there is a $176
difference between the two models.) My client assumed a typographical error. He reviewed the
quotation from Northwestern Power Equipment, which is what he used in his bid, and found that it
references Addendum No. 1 Jn addition to this reference, you records should confirm that
Northwestern Power Equipment received the addendum (if the addendum was sent to Northern
Power and was acknowledged).
Mr. Ufevere also said that the addendum added about $100 worth of landscape work, the seeding
around the valve. Three Rivers sees this as a clarification of the work, not an addition, as he had
assumed that this landscaping was already included. (You always landscape around valves, and the
plans and specifications did not indicate otherwise.)
As I mentioned in my April 14 letter, the addendum was not material and, as a result, you may
waive the failure of Three Rivers to acknowledge it in its bid. The failure to acknowledge a bid
addendum is a waivable irregularity if the addendum (1) eases performance, (2) increases costs by
only a negligible amount, or (3) is purely technical without a cost impact. See Paul Shnitzer,
GOVERNMENT CONTRACT BIDDING, at 11 -28 — 11 -31 (Fed. Pub" 3d. ed. 1992) (citing
numerous decisions); Richard J. Bedmar, et al, CONSTRUCTION CONTRACTING, at 101 -04
(Geo. Wash. U. 1991); see, e.g., Grade -Way Constr. v. United States, 7 Cl. Ct. 263, 268 -70 (1985)
(two addenda held non - material; one specified an assumed start date and noted that some rights -of-
150 SOUiII FIFTH STREET SUITE 2300 MINNEAPOLIS, MINNESOTA 55402 T> L 612 -335 -1500 FAX 612 -335 -1657
2338995v1 LAO. OPPICES IN MINNEAPOLIS, SAINT PAUL, MANX -ATO, SAINT CLOUD AND WASHINtiTON. D.C.
FROM LEONARD STREET & DEINARD (THU) 4.17'03 15:02/ST. 15:01/N0, 4261040037 P 3
April 17, 2003
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way would not be immediately available, and the specified that "fat" clay could not be used in
embankment); Martel Constr. v. State, 668 P.2d 222
addenda held waivable because cost of addenda work was less than the differencebetween the low
j bid and the second low bid).
To the extent the addendum had a cost impact, it was negligible ($276). And again, the City has
absolute proof that Three Rivers received the addendum and was aware of it, which totally
eliminates any argument that Three Rivers had any advantage over other bidders. On top of that, the
addendum was acknowledged in the quotation used by Three Rivers.
Please consider the matter, in consultation with the City's attorney. Perhaps with this information,
especially the City's proof of actual receipt of the addendum, the City's attorney may re- consider
his recommendation.
I plan to attend tonight's council meeting with my client. Thank you for your consideration.
Thank you.
Sincerely,
I.E ET AND DEINARD
Rob er
RTH/jm
cc: Andy Brower, City of Rosemount (by fax)
Charlie Le Fevere, Kennedy & Graven (by fax)
Von Bergstrom, Three Rivers Construction (by fax)
2338995v1
CHARLES L. LEFEVERE
Attorney at Law
Direct Dial (612) 337 -9215
email: clefevere @kennedy - graven.com
May 1, 2003
Jamie Verbrugge, City Administrator
City of Rosemount
2875 145 St. W.
P.O. Box 510
Rosemount, MN 55068
Re: Eastside Watermain Contract Award
Dear Jamie:
You have asked for additional information relating to the City Council's options on the award of a
contract for the Eastside Watermain Project. As noted in my previous letter, there was an
irregularity in the low bid for the project. The low bidder did not acknowledge receipt in its bid of
Addendum One. The Council has some limited discretion to waive irregularities. Therefore, the
Council must decide whether to waive the irregularity and award the contract to the low bidder,
reject the low bid because of the irregularity and award the contract to the second low bidder, or
reject all bids and readvertise.
1. Reject All Bids and Readvertise. One option available to the City is to reject all bids and
readvertise due to the fact that one bidder made a mistake on the bid, the bidders have threatened
legal action that could delay the project, and it is not in the public interest to have this project
delayed until the completion of court proceedings. Mr. Brotzler tells me that the City could
readvertise and return bids to the City Council by June 3r This would still leave sufficient time for
construction of the project this year by a reasonable completion date. It is possible that the bids
received on readvertising would be higher than the bids currently available to the City. Whether
bids will be higher or lower is not within the City's control. However, because there seems to be
substantial interest in doing this project and we are not aware of any changes in the economics of
the construction industry that have occurred in the past few weeks, it seems unlikely that the bids
would be substantially higher the second time around. Although any course of action chosen by the
City Council would be challenged, I believe that this course of action is the least likely of the three
options to be challenged. Additionally, if it is challenged, I believe it is the least likely of the three
to result in a successful effort to delay the project pending litigation. Mr. Brotzler estimates that the
additional costs of rejecting and readvertising, opening bids, tabulating bids, reporting to the
Council, etc. would be $2,000 to $3,000.
2. Reject Low Bid and Award Contract to Second Low Bidder. The second option is to reject
the low bid on the ground that the bidder did not acknowledge Addendum One. Three advantages
of this option over the option of rejecting all bids and readvertising are that (1) the City Council
will know the price of the contract ($940,738.00), (2) the City could proceed with the project
immediately, and (3) the City would not incur additional engineering costs for rebidding. The
disadvantage, of course, is that the project would cost nearly $5,000 more than the low bid. It is
possible that the low bidder would sue the City, challenging this award, and attempt to enjoin
proceeding with the project until litigation was complete. However, I do not believe that the City
Council is legally required to waive an irregularity that has an impact on price, and the attorney for
the low bidder has not asserted that the City is legally obligated to waive the irregularity.
Therefore, it is less likely that the low bidder would sue than that the second low bidder would sue
if the contract were awarded to the low bidder. Additionally, even if the low bidder did sue, I
believe that it is much less likely that a court would issue a temporary restraining order or
temporary injunction to restrain the City from proceeding with the project pending litigation.
3. Waive Irregularity and Award to Low Bidder. The advantage of waiving the bid and
awarding to the low bidder is that the City would receive the lowest bid price, saving just under
$5,000 on a project just over $935,000. If the award is successful and is not challenged, or if a
challenge is not successful in delaying the project, the City would be able to proceed promptly with
the project. The disadvantage in this case is that the second low bidder has indicated that it would
challenge waiving the irregularity and awarding the contract to the low bidder. A legal challenge
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would cost the City attorney's fees and engineer's and could delay the project for several weeks, or
even a few months.
In this case, the facts seem to be relatively uncomplicated, and I would expect that legal fees
through the temporary injunction phase would be between $2,000 and $5,000. There will also be
other expenses to the City, primarily in the form of time spent by staff and engineering consultants.
Challenges to bid awards are now covered under the LMCIT insurance policy. Therefore, the
LMCIT would assign an attorney to defend this case. However, it seems likely to me that legal fees
in the range of $2,000 to $5,000 would be within the City's deductible. Therefore, the City would
wind up paying the attorney's fees.
It is typical for a challenge in a case such as this to begin with a request by the challenger to the
court for issuance of a temporary restraining order (TRO). This is an order of the court that
preserves the status quo by preventing the execution of a contract or construction of the project.
TROs may be issued without a hearing and are sometimes issued without giving advance notice to
the City. It is not difficult to convince a court to issue a TRO because it preserves the status quo
until a more deliberative decision can be made on the legality of the City's actions. TROs usually
last only for a few days until a hearing can be scheduled on whether the court should issue a
temporary injunction. Like a TRO, a temporary injunction can preserve the status quo by
preventing the City from proceeding with the project. However, a temporary injunction is
ordinarily in place until the matter is finally resolved in court by a trial on the merits of the case,
and therefore could last weeks or months.
If the City Council decides to award the contract to the low bidder to find out whether a challenge
will be brought by the second low bidder, it is committed to that course and is not free to withdraw
its acceptance in the event of a lawsuit and award the contract to the second low bidder (unless the
low bidder releases the city from the contract). Therefore, once the Council decides to award the
contract to the low bidder, the project may be delayed until the case is finally resolved after a trial
on merits. If the City ultimately loses (that is the challenger convinces the court that the City acted
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in violation of the public bidding law), the City could either readvertise or award the contract to the
second low bidder (if the second low bidder is still willing to honor its bid).
As I indicated in my letter of April 9 t , in the court's determination whether to issue a TRO or
temporary injunction, one of the primary factors is the likelihood that the challenger will succeed
on the merits after trial. The challenger is not required to prove at this stage that it will prevail on
the merits, only that there is a reasonable likelihood that they will do so.
The merits of this case turn on the question whether the defect or irregularity of failure to
acknowledge the addendum is sufficiently material that the City Council is not free to waive the
irregularity and award the contract to the low bidder. As I understand the facts relating to the
addendum, there were two matters that changed the scope or cost of the work. One was that
additional area was added to the landscaping to be done by the bidder. The second is that a valve
specified as a part of the equipment was changed. In a letter dated April 14, 2003, legal counsel for
the low bidder characterized the changes as "typographical errors" and "technical, no -cost
changes." However, the information from the City's engineer is that the change to the scope of the
landscaping, although small, would probably have resulted in a bid change of $100. Additionally,
the cost of the substituted valve would have increased the cost by $176. This has been confirmed
by a letter from the valve supplier to the City's consulting engineer dated April 9, 2003.
Assuming that the Council agrees that the bid irregularity could result in a difference in price of
approximately $276, the question is whether failure to acknowledge the addendum in the bid form
is a material defect that the Council is not free to waive.
It is well settled in the law that once a bid has been opened, the public entity has no authority to
make any material changes or modifications to the bid, even though the public entity may waive
irregularities. Therefore, the question is whether an irregularity that would result in a change of
approximately $276 in case such as this is "substantial or material." The actual dollar amount of
the value of the irregularity is small. And it would seem to make sense that the public authority
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ought to be able to waive an irregularity resulting in such a small change in the amount of the
contract, particularly where the low bidder would have been low bidder either with or without the
change. However, I would be concerned that a court may not be willing to authorize the City to
make a change that does have an effect on price. The general rule is that price, or other things that
go into the actual determination of the amount of the bid are all matters involving the substance of a
competitive bid. The question, then, is whether irregularities that make a difference in price can be
waived if the price difference is sufficiently small. The cases in Minnesota law do not specify a
specific percentage of price that is so small that a public entity is entitled to disregard it.
One case that would seem to support the position that the City can waive the defect and award to
the low bidder where the dollar amount of the prior difference is small is the unreported Court of
Appeals case of Madsen - Johnson v. City of Becker 1996 WL 106192 (Minn. App. March 12,
1996). In that case the Court of Appeals ruled that the City could waive a defect having a value of
$18,200 on a bid of $6,847,000 (or 27 /100ths of one percent) where the amount of the variance was
less than the difference between the low and second low bidders. However, the case was decided
by a divided court on a 2 to 1 vote. Additionally, there are other decisions that do not seem to favor
giving City Councils so much latitude in waiving irregularities that affect price. For example, in a
more recent Minnesota Court of Appeals case, Lovering- Johnson v. City of Prior Lake 558 N.W.
2d 499 (Minn. App. 1997), the court held a defect to be material that changed the price by $21,500
on a contract of $2,625,601 (a variation of 8 /100ths of 1 %). In the case of Duinick Brothers, Inc .,
v. State of Minnesota C3 -97 -972 (Minn. App. November 25, 1979) the court affirmed the
rejection of a bid for failure to acknowledge an addendum having a value of $13,000 on a contract
of $2,364,000 (about one -half of 1 %). Both of these cases have price differences that are slightly
higher, expressed as a percentage of the total bid price, than the case currently before the City
Council (which is 3 /100ths of 1 %). However, as noted in my letter of April 9, 2003, there is one
case in which a federal claims court ruled that the failure to acknowledge receipt of an addendum of
a value of $1,500 required rejection of a bid on a contract of $11 million (about 1 /100ths of 1 %).
Grade -Way Construction vs. United States 7 Cl. Ct. 263 (1985).
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In my opinion, there is a fairly good chance that the City would eventually be successful in
convincing the court that a bid irregularity that could have affected price only in the amount of
$276 on a bid of over $935,000 is not material. However, there is enough support in the case law
for an argument to the contrary that I believe there is a better than even chance that a challenge by
the second low bidder would result in at least a temporary restraining order, and possibly a
temporary injunction. Therefore, if the City is concerned about the schedule for proceeding with
the project, it should understand that there is a substantial risk that the project could be delayed by
litigation if the contract is awarded to the low bidder.
Please let me know if you have any further questions.
Very truly yours,
Charles L. LeFevere
CLL:sez
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