ALJDEC decisions subject to certification as final

20-0001-PHX · City of Phoenix · 2020-12-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Phoenix Sky Harbor International Airport Terminal 4 South 1 Concourse Concrete Apron Design-Bid-Build Project - Protest of Contract Award

No. 20-0001-PHX

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: The hearing was conducted on a review of the City of Phoenix’s administrative record, without briefing or additional evidence

ADMINISTRATIVE LAW JUDGE/HEARING OFFICER: Thomas Shedden

FINDINGS OF FACT

Overview and Resolution

The City of Phoenix and the Arizona Office of Administrative Hearings (“OAH”) have a contractual relationship under which OAH conducts administrative review of disputes in City procurement matters. The City Engineer, through the Street Transportation Department appointed OAH as the hearing officer in this matter.

The City provided OAH with an administrative record on November 12, 2020; the matter was evaluated based on that record without legal briefing or supplementation of the record.

This matter involves the Office of City Engineer, Design and Construction Procurement’s Call for Bids for construction services to be provided at Sky Harbor International Airport (the “Project”) that was published on August 20 and 27, 2020.

The Project is officially known as the “Phoenix Sky Harbor International Airport Terminal 4 South 1 Concourse Concrete Apron Project (No. AV08000083 FAA).”

The issue under consideration is protester J. Banicki Construction, Inc.’s request for hearing regarding its protest of Ames Construction Inc.’s bid to provide the construction services.

Banicki alleges that Ames’s bid is non-responsive and should be disqualified because Ames did not include on its “List of Major Subcontractors and Suppliers” or LOS-1 form, the identities of all subcontractors/suppliers that would provide services “equal to or greater than 5% of [Ames’s] base bid.”

Ames has acknowledged that it should have included on its LOS-1 form its ready-mix concrete supplier Calportland, but it “inadvertently left off” that entry.

The LOS-1 form explicitly informs the bidders that “The City requires that ALL vendors providing work equal to or greater than 5% of the base bid are listed or you will be disqualified.”

Consequently, Banicki’s protest should be sustained, and Ames’s bid should be disqualified as non-responsive. If that happens, Banicki will become the bidder that should be recommended for the award of the Project.

Background and Details

The Project is a procurement matter in which construction services are at issue. Consequently, the provisions of City Code Chapter 2 (Administration) Article XII (Public Works Contracts) are applicable. Also applicable is Administrative Regulation A.R. 3.25 Revised (Procurement of Design and Construction Services).

The purpose of A.R. 3.25, Revised is to establish policy and guidelines for the procurement of design and construction services in support of the City's Capital Improvement Program.

As defined in A.R. 3.25, Revised, the Call for Bids is an Invitation for Bids (“IFB”) and the Project delivery method is Design-Bid-Build, typically referred to as the “low bid” process.

The IFB was issued by the Office of City Engineer, Design and Construction Procurement, and was published on August 20 and 27, 2020. At least five addenda were issued. Bids were originally due September 15, 2020; in an Addendum dated September 15, 2020, the deadline was extended to September 22, 2020.

The IFB provides in part:

Through the IFB, The City of Phoenix is seeking a qualified contractor to provide construction services for the construction of the Terminal 4 South 1 Concourse Concrete Apron (T4S1) at Phoenix Sky Harbor International Airport.

The scope of work consists of constructing the new concrete aircraft apron around the currently under construction Terminal 4 South Concourse Number 1. The project consists of the construction of approximately 48,000 square yards of apron pavement and includes, but not limited to the following work items: airfield concrete pavement, GSE/Vehicular concrete pavement, asphalt pavement, pavement base course, drainage structures, jet blast deflection systems, minor electrical work, bollards, manhole and storm drain adjustments, and pavement joint sealants. All work will be constructed in accordance with FAA Standards. Work will be performed in conjunction and cooperation of the ongoing construction of the Terminal 4 South 1 Concourse.

Bidders were required to include with their bids the List of Major Subcontractors and Suppliers (LOS-1) form, that provides in part:

I hereby certify by signing below that the above listed companies will be utilized to perform work on this project for an equal to or greater than 5% of the base bid. These companies will not be removed or replaced without prior written approval by the City of Phoenix Project Manager. The City requires that ALL vendors providing work equal to or greater than 5% of the base bid are listed or you will be disqualified.

(Bolding added.)

Three days after the deadline for bids, Bidders were required to submit a “List of All Subcontractors and Suppliers” or LOS-2 form.

The City’s Preliminary Bid Results posted on September 23, 2020 show that Pulice Construction Inc.’s base bid was $9,973,348.00; Ames’s base bid was $10,393,013.26; and Banicki’s base bid was $10,512,890.50.

Five percent of Ames’s bid is $519,650.65; and 5% of Pulice’s bid is $498,667.40.

On October 8, 2020 Banicki filed with the City a Protest alleging that both Ames’s and Pulice’s bids were nonresponsive.

As discussed below, the City solicited responses from Ames and Pulice, and from its technical consultant SMITHGROUP.

Through a letter dated October 26, 2020, the City informed Banicki that after reviewing its protests, the City had determined that Pulice’s bid was non-responsive and disqualified, and that Ames’s bid was responsive, resulting in a determination that Ames would be recommended for the award of the Project.

On October 26, 2020, the City also issued a letter to Ames through which it informed Ames that it had determined that Ames’s bid was responsive and that Ames would be recommended for award of the Project, and a letter to Pulice, through which it informed Pulice that its bid was disqualified as non-responsive.

Banicki’s protest of Ames’s Bid

The Project calls for 20,000 cubic yards of Portland cement concrete pavement (“PCCP”). There are two methods by which the required concrete may be supplied: buying ready-mix concrete at a cost of $1.4 million to $2.6 million, or making the concrete in a batch plant at the site. If the concrete is made in a batch plant, the contractor must either buy materials at a cost of about $1.4 million, or control the production and delivery to the site of those materials.

Ames does not produce the material required to make concrete.

Ames’s LOS-1 shows two major subcontractors/suppliers: Ames itself and Buesing Corp., neither of which is supplying the ready-mix concrete or the aggregate, cement and other material required to make concrete.

Ames’s LOS-2 shows that Calportland will be supplying ready-mix concrete at a cost of $98,811.81.

In its protest of Ames’s bid, as pertinent to this matter Banicki asserted that Ames’s LOS-1 form did not include the identities of all subcontractors/suppliers that would provide services “equal to or greater than 5% of [Ames’s] base bid.”

In particular, Banicki asserted that because Ames does not produce the material required to make concrete, it must either buy those materials or buy ready-mix concrete, the cost of which will exceed 5% of Ames’s base bid in either case.

Through an email dated October 14, 2020, the City informed Ames that Banicki had filed a protest and it asked Ames to “Explain how or why Ames did not list their aggregate or cement powder supplier for the PCCP on the [LOS]–1 form.”

Ames responded to the City by email on October 14, 2020, stating “Cal Portland will be supplying Ready-mix for [the] PCCP, [their] total amount was inadvertently left off [the] LOS 1.”

Through an email dated October 19, 2020, SMITHGROUP, the City’s technical consultant, informed the City that it had reviewed Banicki’s protests and it offered technical comments.

As pertinent to this matter, regarding Banicki’s protest of Ames’s bid, SMITHGROUP provided:

There are two scenarios for supplying the concrete for the PCCP: scenario (a) an on-site concrete batching plant with materials supplied by others, assuming the prime contractor does not own or control aggregate and cement production and delivery; and scenario (b) delivery of ready-mix concrete to the site.

Regarding scenario (a), SMITHGROUP provided calculations showing that the cost of the materials required to make the concrete on-site would be approximately $1,438,620, which is 14.8% of Ames’s bid. SMITHGROUP found that its estimate was consistent in magnitude with Pulice’s bid showing that it was planning on buying PCCP aggregate for a cost of $1,424,855 (assuming that Pulice intended that price to cover all the required materials).

SMITHGROUP concluded that unless Ames could shows that it owns and controls the production and delivery of the materials required to make concrete, the cost of the materials will exceed 5% of Ames’s bid.

Regarding scenario (b), SMITHGROUP reported that recent industry prices for ready-mix are from $70 to $130 per cubic yard; the project calls for 20,000 cubic yards; therefore the cost to buy the ready-mix concrete would be between $1,400,000 and $2,600,000. SMITHGROUP noted that Banicki planned to buy ready-mix from Calportland at a cost of $2,900,751. SMITHGROUP concluded that if Ames was going to buy ready-mix concrete, the cost would be significantly in excess of $519,300, which SMITHGROUP found was 5% of Ames’s bid.

SMITHGROUP noted that although Ames’s LOS-2 shows Calportland as a supplier of ready-mix concrete at cost of $98,811.81, this price was not consistent with the estimated value of the required concrete.

Through a letter dated October 26, 2020 the City informed Ames that it had concluded that Ames’s bid was responsive. Regarding Ames’s failure to list an aggregate supplier in its LOS-1, the City found that Ames was not required to do so because Calportland was going to provide aggregate for a cost of $98,811.81, which is less than 5% of Ames’s base bid, and that in its LOS-2 form Ames had listed Calportland as the ready-mix concrete supplier.

Through a letter dated October 26, 2020, the City informed Banicki that it had determined that Ames’s bid was responsive because Ames had properly listed its aggregate or cement supplier in its LOS-2.

The City’s two letters dated October 26, 2020, misstate the facts because Ames’s intention was to have Calportland supply ready-mix concrete, not aggregate and cement to be used by Ames to make its own concrete on-site.

Ames’s cost to buy the ready-mix concrete will exceed 5% of its base bid as evidenced by Ames’s email acknowledging that Calportland should have been listed in its LOS-1 and by SMITHGROUP’s finding that the expected cost of the required ready-mix concrete will be $1.4 million to $2.6 million.

Banicki requested a hearing through a letter dated October 27, 2020. Banicki’s hearing request is limited to the issue of whether Ames was required to list on its LOS-1 either a material supplier or a ready-mix concrete supplier.

Through its request for hearing, Banicki provided that there were only three possible scenarios for supplying the required concrete and that under all three, Ames’s bid should be determined to be non-responsive.

Under Banicki’s Scenario 1, Ames would purchase the required ready-mix concrete from Calportland, but it would not be possible to purchase 20,000 cubic yards for only $98,811.11, considering that Banicki itself was to pay Calportland $109.50 per cubic yard. Banicki’s position is consistent with SMITHGROUP’s conclusion regarding the cost of purchasing ready-mix concrete.

Under Banicki’s Scenario 2, Ames would purchase the required ready-mix concrete from multiple suppliers, with purchases limited so that no one supplier was providing material at a cost of greater than 5% of Ames’s base bid. Under this scenario, Ames’s bid would be non-responsive because Calportland is the only ready-mix supplier listed in Ames’s LOS-2.

Under Banicki’s scenario 3, Ames would buy $98,811.81 worth of ready-mix from Calportland and “batch” the remainder of the concrete on-site. Because Ames does not produce the material required to make concrete, it would need to buy that material, but it did not list on its LOS-2 the identities of any suppliers of the material. Under this scenario, Ames’s bid would be non-responsive.

Banicki’s protest of Pulice’s Bid

On its LOS-1, Pulice listed Buesing Corp. as supplying aggregate base course and McNeil brothers as placing the concrete.

On its LOS-2, Pulice listed Salt River Materials as supplying “PCCP (aggregates)” at a cost of $1,424,855, which is over 5% of Pulice’s base bid.

As pertinent to this matter, in its protest Banicki asserted that Pulice was required to list Salt River Materials on its LOS-1.

Through an email dated October 14, 2020, the City informed Pulice that Banicki had filed a protest and it asked Pulice to explain why it had not included on its LOS-1 a supplier of aggregate and cement and why Salt River Materials was not listed on its LOS-1.

Pulice responded to the City through a letter dated October 16, 2020, in which it explained that it had changed its strategy between the date the bids were due (September 22nd) and the date the LOS-2 was due (September 25th), and that under the new strategy, Salt River Materials would be providing materials totaling more than 5% of Pulice’s bid.

Regarding Banicki’s protest of Pulice’s bid, SMITHGROUP found that no (technical) analysis was necessary because as a factual matter, Pulice listed Salt River Materials as the supplier of for PCCP (aggregate) at a cost of $1,424,855, which is more than 5% of Pulice’s bid.

Through a letter dated October 26, 2020 the City informed Pulice that it had concluded that Pulice’s bid was not responsive because it had failed to list on its LOS-1 Salt River Materials, a supplier who would provide greater than 5% of Pulice’s base bid value.

Through a letter dated October 26, 2020, the City informed Banicki that it had concluded that Pulice’s bid was not responsive and that the City had rejected Pulice’s bid.

CONCLUSIONS OF LAW

This is a procurement matter subject to Phoenix City Code Chapter 2 (Administration) Article XII (Public Works Contracts) and the related Administrative Regulation, A.R. 3.25, Revised.

The City Engineer, through the Street Transportation Department, is responsible for overseeing the selection of a contractor to perform the Project’s required construction work. See A.R. 3.25, Revised §§ III and IV.

The City Engineer has authority to appoint a hearing officer to review the protest at issue. City Code § 2-188(E); A.R. 3.25, Revised §§ XIII (E)(6) and (E)(8)(g)(1).

The Office of Administrative Hearings and the City of Phoenix are authorized to enter into contracts for “purpose of providing administrative law judges ... for administrative proceedings.” Ariz. Rev. Stat. § 41-1092.01(J). Under that authority, the City has appointed the Office of Administrative Hearings to act as the hearing officer in this matter.

Banicki bears the burden of proof. City Code § 2-190.1(B); A.R. 3.25, Revised § XIII (E)(8)(g)(8).

The standard of proof on all issues is that of a preponderance of the evidence. See Ariz. Admin. Code § R2-19-119.

A preponderance of the evidence is evidence that is “sufficient to incline a fair and impartial mind to one side of the issue rather than the other.” Black’s Law Dictionary 1373 (10th ed. 2014).

This matter is suitable for resolution based on the administrative record without the need for briefing or documentation other than that which is in the administrative record. See A.R. 3.25, Revised § XIII (E)(8)(g)(1).

Banicki’s protest meets the requirements set out in City Code section 2-188(C) and A.R. 3.25, Revised section XIII.

A city’s procurement decision should not be disturbed absent a finding that the decision was “illegal, unfair or arbitrary.” Brown v. City of Phoenix, 77 Ariz. 368, 377, 272 P.2d 358, 364 (1954).

An arbitrary action is an “unreasoning action, without consideration and in disregard for facts and circumstances.” Maricopa County v. Gottsponer, 150 Ariz. 367, 372, 723 P.2d 716, 721 (App. 1986)(quoting Petras v. Arizona State Liquor Board, 129 Ariz. 449, 631 P.2d 1107 (App. 1981)).

The preponderance of the evidence shows that Ames’s bid was non-responsive because Ames did not list Calportland on its LOS-1 form, which error Ames has acknowledged. The City’s decision to deny Banicki’s protest of Ames’s bid was arbitrary because that decision was based on the erroneous conclusion that Calportland would be supplying material with a value of less than 5% of Ames’s base bid.

Because Ames’s bid was non-response, Banicki’s protest should be sustained, Ames’s bid should be disqualified, and Banicki should be recommended for the award of the Project.

RECOMMENDED ORDER

IT IS RECOMMENDED that J. Banicki Construction, Inc.’s protest of Ames Construction Inc.’s bid be sustained;

IT IS FURTHER RECOMMENDED that Ames Construction Inc.’s bid be disqualified;

IT IS FURTHER RECOMMENDED that J. Banicki Construction, Inc. be recommended for the award of the Project.

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-137160-45720000Done this day, December 17, 2020.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge/Hearing Officer

Transmitted electronically to:

City Engineer,

c/o Kandi Kawolsky

City of Phoenix Street Transportation Department

Ed Zuercher, City Manager

City of Phoenix

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-137160-45720000By