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Firm takes issue with Holly Street Power Plant bidding process

Monday, December 20, 2010 by Josh Rosenblatt

Ever since the Holly Street Power Plant went up in 1960, it has been a source of controversy for the city. Now even the process of bringing down most of the decommissioned facility is fraught with problems.


As the city prepares to decommission and dismantle the 50-year-old facility, questions have arisen about the way city staff chose the company they will recommend to Council to do the work.


Holly Street, a 570-megawatt natural gas and fuel oil-fired power plant located on the shore of Lady Bird Lake in a predominately Mexican American neighborhood, has long been a lightning rod for racial and socio-economic disputes. For years, residents of the Holly Street neighborhood complained about noise and pollution, with some claiming health problems resulting from exposure to the plant.


Council passed a resolution in 1995 to close the plant, which ceased power production in September 2007. Since then, Austin Energy has been in the process of evaluating how best to decommission and demolish the plant. That work would involve bringing most of the above ground structures on the site – boilers, tanks, buildings, etc. – and doing soil remediation and some underground pipe removal. The electric substation will remain.


On April 26, the city put out a Request for Proposals and received bids from six companies. In early December, staff posted on the agenda for the Dec. 13 meeting of the Electric Utility Commission its choice to recommend for Council approval: TRC Environmental Corporation, from Austin. TRC’s bid for the project, $24.9 million, was the second highest the city received, coming in nearly $11 million over the lowest bid of $13.84 million.


That’s where the trouble began.


First, the company that offered that lowest bid, CST Environmental, LP, filed an official protest with the city. Second, the Electric Utility Commission, at that Dec. 13 meeting, expressed confusion over the bidding process and voted to express that confusion to Council.


The following day, Thomas Nesbitt, attorney for CST, sent a letter to members of the City Council, members of the commission, and a city procurement officer, explaining why his client had filed the protest. First, he wrote, “despite the fact that CST presented the lowest bid, received a score equal to TRC’s in ‘Financial Stability,’ and scored second highest (higher than TRC) in ‘Reference Checks,’ CST was not even given the opportunity to interview for the project.”


Nesbitt went on to say that city staff had never explained why it hadn’t offered CST an interview.


Second, staff did not inform the Electric Utility Commission that CST had filed a protest. “We believe the Commission was deprived of essential information related to CST’s protest and the potential legal effect of its vote,” Nesbitt wrote.


Third, wrote Nesbitt, the city is required under Texas law to award the project to the firm that offers the “best value” to the city based on published criteria and on its ranking system. Any contract offered to a firm not offering the best value would be void. By offering the lowest bid, Nesbitt wrote, CST believed it was offering the city that best value.


“We want for the Commission to have an opportunity to get more information and reconsider whether to recommend the firm that the staff is recommending,” Nesbitt told In Fact Daily. “We would also like to be given more information about how, specifically, these criteria came to be applied.”


In the evaluating matrix used by staff, the cost of bid was one of 15 criteria. According to the scoring system, “Price” was the third-highest priority for the evaluation panel, behind “Offeror’s Comparable Project Experience” and “Team Structure, Work Approach & Delivery Schedule.”


Rosie Truelove, acting director of the Contract and Land Management Department, told In Fact Daily that TRC Environmental was simply “the overall Top Ranked firm after an evaluation all six proposals received based on the evaluation criteria published in the solicitation.”


Meanwhile, CST, Truelove wrote in an email, “was ranked sixth out of all six firms,” which explains why the company wasn’t interviewed. “Within the solicitation, the published evaluation criteria item for ‘Interview’ stated that no more than five firms would be interviewed.  The City selected the three top ranked firms to interview.”


As for why CST’s protest was not mentioned at the Electric Utility Commission meeting, Truelove said that it was simply a matter of adhering to established city procedure. “When a protest is filed … the City must evaluate the grounds for the protest,” she wrote. “At the time of the EUC meeting, the City was still in the process of evaluating the grounds of the protest which was received on December 9th.”


As for the Electric Utility Commission, its members expressed concern about the process, wondering why TRC’s $24.9 million bid was chosen over that of staff’s second choice, Dixie Demolition, which put in a bid for approximately $18.8 million.


“You’re saying there are other evaluation factors, but that’s very vague for $6.1 million,” said Commission Member Gary “Bernie” Bernfeld to Rose San Miguel, the Holly Street environmental care and protection project manager. “It would be helpful for us on the commission to know what factors weighed so heavily. What is it that you’re seeing that’s worth the other $6 million?”


San Miguel replied that the decision was based on “Experience, not only of the firm but of the team, the individuals that were assigned to this project.”


The commission voted to accept staff’s recommendation but added a written statement to Council that the commission has concerns with the bidding process and the “large price differentials between the first and second bids.”


The issue is scheduled to go before Council on Jan. 13.

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