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Flawed RFP process dooms Holly decommissioning to more delays

Friday, April 29, 2011 by Josh Rosenblatt

The long-awaited decommissioning of the Holly Street Power Plant has been put on hold again. At their meeting yesterday, City Council voted to postpone the execution of a contract in order to better understand problems with the project’s Request for Proposal process.


At issue is the substantial difference in price between the original bid made by the staff-recommended contractor, Austin-based TRC Environmental Corporation, last August and the bid the company submitted after the city reissued the solicitation in February. Originally, TRC submitted a bid in the amount of $24.9 million. When questions arose as to why staff was recommending that bid when other contractors’ proposals had come in much lower, staff reposted the RFP with modified criteria.


TRC’s staff-approved bid on that second RFP was $11.5 million. At Tuesday’s work session, Council members wanted to understand how the contractor had managed to shed more than $13 million off its original proposal.


“I can’t explain it to the public,” Mayor Pro Tem Mike Martinez told staff. “I don’t know how to explain it so that they understand how the exact same project … can go from in January from $24 million to $11 million. And if we had voted on this in January, were we really paying the right price at that time?”


Staff members responded by taking blame for what they admitted was a flawed first proposal process. The first problem with the initial RFP was that the city informed all proposing contractors that they would be paid $5 million less for the project than their bids to account for the money those contractors would be receiving for the materials they could sell in the recycling market.


”If they got $10 million (for those materials from the plant), great for them. One million, that’s a risk that they took,” said Assistant City Manager Rudy Garza.


Rather than take that risk, TRC chose to add $5 million to their bid. Once the city dropped its provision charging the extra $5 million, the company took that money out of their bid.


Factors like increases in pricing for scrap metals, the identification of local contractors for the recycling of salvage materials, and decreased projected profits accounted for the remainder of the price difference between the two bids.


Cheryl Mele, chief operating officer for Austin Energy, agreed that the provision caused problems, though, she said, “it was good intent to try to make sure that we recovered some of the money for our customers and to make sure that we encouraged maximum recycling on the project.”


In addition to getting rid of the $5 million provision, the city also changed the scoring matrix on the second RFP to put more weight on price, up from 13 percent to 25 percent, Austin Energy’s standard for such bids.


“We did shift the matrix because we wanted to make sure we had a contractor who was sensitive to the neighborhood, would work safely, would respect all the things we were asking them to do, over the price,” said Mele. “And we saw the results of that. In the future we need to be using the matrix that we have because it seems to yield better results.”


Garza agreed. “I can’t recall another RFP where price was less than a quarter of the overall points,” he said. “The thing we learned is that regardless of how complicated or how sensitive a project is that we’re working on, our standard matrix and our standard process works.


“The truth is we got a little too complicated and a little too fancy, and it didn’t work out well for us. It’s a good thing it got pulled down,” he said.


Near the end of Tuesday’s presentation, Council members seemed frustrated by the problems arising from the RFP process and from the extended timeline for the decommissioning of the plant.


Council Member Sheryl Cole wanted to know what Council’s options would be going forward. “Can we throw out the bid and start all over?” she asked. Option two, she said, would be to conduct interviews with all bidding contractors, though staff had already said that wouldn’t change the outcome of the evaluation. “The third option is for the Council as a whole to re-evaluate the proposals,” Cole said. 


To which Assistant City Attorney Gordon Bowman responded dryly, “And the fourth choice would be to follow staff’s recommendation.”


Thursday’s postponement seemed inevitable by the end of Tuesday’s debate, with many of the Council members expressing their desire to be able to guarantee the integrity of the RFP process before voting on the execution of the contract.


“I don’t want to delay this project anymore,” said Martinez. “It’s critically important that we honor our commitments to the Holly neighborhood. But we have to do it right.”

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