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Council approves priciest electrical services contract

Monday, December 13, 2010 by Elizabeth Pagano

City Council accepted a bid recommended by city staff for electric transmission and distribution services last week despite the fact that it was the most expensive bid up for consideration. Six companies bid to provide the services to Austin Energy, but it was Pike Electric, the city’s current provider, that won the contract. Under the terms of the two-year service contract, Pike will provide the services at a price of $8.2 million, nearly two million dollars more than the lowest bid offered.


The criteria used for selecting the company was revealed at Thursday’s City Council meeting and fell under some scrutiny as Council members and competing companies struggled to make sense of staff’s recommendation to approve a contract that far exceeded the price of other bids.


“If there ever was a situation where a repeat low bidder had a reason to question the fundamental fairness and wisdom of Austin Energy’s contracting process, this case presents it,” said Leonard Smith, speaking on behalf of T & D Solutions. T & D Solutions was the lowest bidder in both rounds of solicitations, with an offer of $6.5 million dollars.


In Fact Daily reported on the cost disparity in a story on Dec. 6.


“This is not a low-bid situation, unfortunately. As Austin Energy will tell you, they have to have an extreme amount of confidence in the firm,” explained Purchasing Officer Byron Johnson.


In the matrix used to evaluate bidders, staff quantified confidence using a point system. Staff put a high premium on the experience and safety records of the bidding companies.


T & D Solutions has been in the industry for five years, while Pike Electric has been operating nationwide for 65 years. This disparity was reflected in the evaluating matrix, which assigned them one and 15 points in the experience category, respectively.


Meanwhile, the $1.7 million dollar difference between the bids created only a seven-point gap in the cost category.


Council Member Bill Spelman questioned the emphasis put on experience over cost. “I’m just trying to get a reality check here,” he said. “Is that really twice as important, from AE’s point of view, as $1.7 million dollars?”


“Experience is important, because of the hazardous nature of this, but maybe we can weigh the factors a little bit different for future solicitations,” responded Johnson.


Ultimately, Council members seemed convinced by the importance of safety in this case.


Bidders were asked to provide a safety history as well as a record of what types of injuries had occurred on their jobs. While T & D Solutions provided a safety history, they failed to submit a log of accidents and injuries.


“Their submittals, and the lack of that type of information, is worth $1.7 million dollars, rather than take that risk,” stated Austin Energy Chief Operating Officer Cheryl Mele.


Still, there was agreement that the evaluation matrix could use some refinement.


“We probably need to calibrate that experience level,” said Mele. “There is probably a difference between five and 10. Is there that much difference between 10 and 65? I think that’s where we have opportunity to improve our process.”


Spelman agreed that the matrix could use some work. “I think the experience thing is a mistake in the matrix, and we need to fix that so we don’t have that issue come up again in a case where it really does matter,” he told In Fact Daily.

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