Suit: Bid format excludes small firms

The suit has brought plans to build five urban schools to an abrupt halt, as the state’s Superior Court two weeks ago stayed the new bidding process, called “design-build.” While the court has agreed to accelerate SDA’s appeal of that ruling, Kris Kolluri, SDA chief executive, doesn’t expect a resolution until the fall.

That doesn’t faze the Springfield-based Mechanical Contractors Association of New Jersey, which has about 85 member-firms representing 230 additional mechanical contracting and service companies. The association argued design-build will favor large companies and encourage cronyism in the awarding of contracts.

The new system will “eliminate competitive bidding opportunities,” wrote Edward Frisch, an attorney with the Westfield law firm of Lindabury, McCormick, Estabrook & Cooper P.C., in a letter to Kolluri on behalf of the association. “Design-build would open the door to possible favoritism or corruption in this contracting.”

Essentially, the new system combines a project’s design and general contracting components into one bidding round, ranking bidders on both technical qualifications and price, Kolluri said. The design-bid-build system it replaced necessitated two bidding rounds, he said. The agency has been using design-build for select projects since January.

But the lawsuit claims design-build is “in direct violation” of competitive bidding laws, as the association said the lack of a detailed, final design when a construction project is launched “could lead to higher construction cost estimates than otherwise.” That’s because of the uncertainty of the project scope and “the need to price in a contingency factor for that uncertainty.” Design-build contractors may be tempted to produce lower-quality designs to increase their profits, the suit said.

Frisch said the system “will only benefit a few large corporations who would partner up with select contractors, and will substantially increase the cost of equipment and installation.” He also said other court rulings have disallowed consolidating the design component in a construction contract.

The contractors’ association had contested the design-build bidding process in the case of the Elliott School, in Newark, a $62.7 million project to replace a school destroyed by lightning a few years ago. Although the stay directly affects only the Elliott School project, Kolluri said he is taking “a wait-and-see approach on the other projects,” which are worth a collective $230 million — including construction costs of nearly $156 million — and would accommodate more than 2,500 students, according to SDA documents. Those schools originally were scheduled to be ready between mid-2012 and late 2013.

Kolluri defended the design-build system as a “transparent and accountable procurement process to put projects out as quickly as possible,” and said the contractors association “will have to live with the consequences” of delays in school projects and the jobs they would have created.

“A relatively myopic and wrong interpretation of the statute will now lead us to delays in what could have been hundreds of jobs created,” Kolluri said. The delay will also have a “domino” effect on the purchase of facilities by the school districts involved, he said. “This is not what we should be doing in the middle of a recession.”

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