HMS CONSTRUCTION, Inc. - California M S.pdf · HMS Construction, Inc. was the lowest responsive, responsible bidder for the above-reference ... determined only during and after contract

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A Veteran Owned Business Enterprise

HMS CONSTRUCTION, Inc.

ELECTRICAL AND GENERAL ENGINEERING CONTRACTORS

2885 Scott Street Vista, CA 92081 Ph (760) 727-9808 • Fax (760) 727-9806 CA lic. 765590 A,B,C10,

HAZ

September 21, 2017

VIA ELECTRONIC MAIL

State of California, Department of Transportation

Division of Engineering Services

Program/Project Management & Office Engineer

1727 30th Street, MS-43

Sacramento, California 95816

Attention: Ms. Jill Y. Sewell, Office Chief

Re: Project: Coronado Bay Bridge Electrical Improvements

Agency: California Department Of Transportation

Contract No.: 11-262204

Low Bidder: HMS Construction, Inc.

High Bidder/Protester: Elecnor Belco Electric, Inc.

Dear Ms. Sewell:

HMS Construction, Inc. was the lowest responsive, responsible bidder for the above-reference

project—by more than $2.2 million. This responds to the protest submitted by Elecnor Belco

Electric, Inc. (EBEI)—the high bidder for the project. Summarily, EBEI’s protest should be

summarily dismissed because EBEI “jumped the gun.” EBEI filed the protest—attacking HMS’

Disadvantaged Business Enterprise (DBE) outreach effort—without realizing HMS had

submitted documentation showing HMS both: (1) met the DBE outreach goal; and (2) made

good faith efforts to meet the goal. Consequently, even if EBEI’s claims were true (they are not,

as detailed below), HMS is still the low bidder entitled to award based on its good faith effort

documentation alone. EBEI’s protest seeks to charge Caltrans a $2.24 million premium (26.7

percent more than HMS’ bid) based on incomplete and wrong factual contentions. The protest

should be denied. HMS respectfully requests Caltrans proceed with award to HMS.

The Project And DBE Requirements

The project consists of substantial and complex electrical work on the Coronado Bay Bridge to

upgrade the lighting system to LED, convert the existing 12KV electrical to 480V, and install

backup generators. HMS is exceedingly qualified for this work, having successfully completed

projects like the following:

• 2015: HMS replaced 2,000 HPS and LPS streetlights to LED type for the City of Vista.

• 2008 to present: HMS installed 6.9 megawatts of 5KV generators, with PLC controls and

36 megawatts of 12KV switchgear at Tripler Army Medical Center Hawaii. All work was

performed with precise cutover plans and temporary power. Power could not be

disrupted for anything, because this is an operational military hospital. All demolition

was in areas that required dismantling the old gear to remove it.

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• Current: HMS performs work through 46KV (the contract at issue has 12KV maximum

voltage).

• 2002 HMS installed current 60 SM Fiber across the Coronado Bridge.

• 1999-2004: HMS installed Freeway Management Projects for Caltrans District 11 Phase

2 and 4. (Interstates 8, 5, 805 and 15).

The project is federally funded and includes a 13-percent Disadvantaged Business Participation

(DBE) goal pursuant to federal DBE regulations. Bidders could satisfy the DBE requirements in

either of two ways: (1) meeting the DBE goal; or (2) submitting documentation showing the

bidder made good faith efforts to meet the goal. Bidders had the option to submit documentation

under either methodology, or both.

The Bids

HMS submitted the low bid in the amount of $8,400,000.00. EBEI submitted the high bid in the

amount of $10,642,883.60—a spread of $2,242,883.60, or 26.7 percent more than HMS.

In its bid, HMS committed to use six DBEs: (1) Aurora International; (2) Cecilia’s Safety

Service; (3) Maneri Traffic Control; (4) Payco Specialties; (5) Cronin Enterprises, Inc.; and (6)

Diverscape, Inc. Enclosed at Tab 1 is the documentation HMS submitted with its bid, detailing

the planned DBE participation in the work. HMS calculated its planned DBE participation at

$1,325,062.20, or 15.77 percent of HMS’ bid price. (Tab 1.)

HMS did not, however, stop there. Even though HMS calculated that it would exceed the DBE

participation goal, HMS also timely submitted documentation to prove it made good faith efforts

to meet the goal. That documentation is voluminous (2,116 pages), already in Caltrans’

possession, and summarized below.

Conversely, EBEI only submitted DBE commitment forms indicating EBEI would involve four

DBEs (two fewer than HMS) for a participation of 14.6 percent (1.17 percent less than HMS).

EBEI’s Protest

EBEI filed a protest (copy at Tab 2) contending EBEI should be awarded the project—at its $2.24

million premium—based on the notion that HMS did not actually meet the 13-percent

participation goal. EBEI filed the protest September 18, 2017, prior to Caltrans scanning HMS’s

voluminous good faith effort documentation and posting it to the Caltrans post-bid website.

EBEI makes a single claim in its protest: that HMS over-counted participation by DBE Cronin

Enterprises, based on the notion that Cronin—when actual construction commences in the

future—will not perform a commercially useful function, such that its participation will not be

counted.

EBEI’s Protest Is Moot Based On HMS’s Good Faith Effort Documentation

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Caltrans may summarily dismiss EBEI’s protest because, even if everything EBEI alleged were

true (it’s not), HMS would still be entitled to award because of its good faith effort

documentation. Enclosed at Tab 3 is Appendix A from the federal DBE regulations, which

details how bidders can meet the DBE requirements through good faith efforts. Under every

metric set forth in that regulation, HMS excelled, as summarized below. HMS’ evidence of good

faith effort consists of 2,116 pages.

To exceed the federal requirements, HMS retained a fulltime person to conduct the good faith

effort. This person lead HMS’ effort and completed all of the following:

1. Making Work Available: HMS made a substantial amount of work available to

DBEs, as shown by the fact that HMS signed up the most individual DBEs of any

bidder.

2. Database Searches: HMS searched the relevant databases to identify DBEs that

would potentially be interested in participating.

3. Market Research: Unlike some contractors, HMS researches and reaches out to

DBEs in a thoughtful/targeted manner. HMS’ good faith effort documentation

confirms HMS is not one of those contractors that simply sends out spam.

4. Written Notices To DBEs: HMS provided records showing its numerous written

notices issued by HMS directly to DBEs. HMS used both fax and email. HMS

began sending notices in August, providing sufficient time for DBEs to investigate,

meet with HMS, and bid. HMS performed the proper follow up. HMS provided

precise logs and examples showing this effort.

5. Follow Up Calls: HMS supplemented its written direct solicitations with follow up

phone calls, and provided a written log of those efforts.

6. Outreach To DBE Organizations: HMS reached out directly to organizations who

represented DBEs in an effort to notify, and make contact with, DBEs.

7. Advertising: HMS advertised multiple times in multiple publications, targeting DBE

readers, and submitted proof of those advertisements with its good faith effort

materials.

8. Assisting DBEs: HMS offered to provide assistance to DBEs interested in the work,

as contemplated by the federal regulations.

9. Not Rejecting DBEs: HMS did not reject any DBE bids.

10. Signing Up DBEs: HMS actually signed up six DBEs to participate in the project—

50 percent more than EBEI.

While this list is non-exhaustive, it is unquestionably sufficient to exceed the good faith effort

threshold.

Notably, EBEI did not submit any documentation of its own efforts. Based on HMS’

investigation, those efforts appear very limited. See, for example, EBEI’s advertisement to DBEs

enclosed at Tab 4, page 2. EBEI did not post that advertisement until September 8, 2017—five

days before the bid deadline. Conversely, HMS advertised beginning July 21, 2017—54 days

before the bid deadline—and continued through August and September. (See HMS’ good faith

documentation.)

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Summarily, Caltrans can and should dismiss EBEI’s protest because HMS made a good faith

effort. Thus, whether it, alternatively, met the goal is not even relevant.

EBEI’s Protest Is Also Without Merit Because It Does Not Raise “Bid Day” Issues

In recent years, Caltrans has received numerous protests by higher bidders claiming that some

DBE or another will not perform a commercially useful function, and therefore the low bid must

be rejected. Caltrans’ established policy is to treat the commercially useful function issue in

accordance with the federal DBE regulations: as a contract performance issue rather than a bid-

day/bid responsiveness issue. Caltrans has termed the issue as one of “contract administration.”

This approach has been confirmed in recent court decisions. The legal bases are set forth below.

Federal regulations require Caltrans monitor DBE activities during the job, and count DBE

participation towards the Caltrans’ ultimate—Caltrans-wide—DBE participation goal. Title 49,

Part 26, Section 26.55, details how Caltrans counts participation during contract performance.

This is the regulation cited by EBEI in its protest. Rather than imposing a speculative pre-award

evaluation framework—as EBEI assumes—the regulation actually discusses how Caltrans counts

actual participation during the work, as the below excerpts confirm:

When a DBE participates in a contract, you count only the value of the work

actually performed by the DBE toward DBE goals.

* * *

Count expenditures to a DBE contractor toward DBE goals only if the DBE is

performing a commercially useful function on that contract.

* * *

Use the following factors in determining whether a DBE trucking company is

performing a commercially useful function….

* * *

Do not count the dollar value of work performed under a contract with a firm

after it has ceased to be certified toward your overall goal.

* * *

Do not count the participation of a DBE subcontractor toward a contractor’s final

compliance with its DBE obligations on a contract until the amount being

counted has actually been paid to the DBE.

(49 C.F.R. 26.55 [emphasis added] at Tab 5.) This regulation covers how Caltrans counts DBE

participation during and after performance. Whether HMS actually meets the goal is an issue

determined only during and after contract performance, not at the bid acceptance stage. As such,

EBEI’s protest fails to raise any issue having to do with bid responsiveness or bid acceptability.

For this reason, alone, EBEI’s protest should be rejected.

EBEI’s Glass House—If Cronin Is Unacceptable, So Is EBEI’s Supplier

DBE regulations have accomplished their goal: supporting and growing DBEs. Many of those

DBEs are in the material and equipment supply business. Both EBEI and HMS achieved

significant portions of their DBE participation through DBE suppliers. HMS chose Cronin—a

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local DBE supplier that also performs on site coordination and safety work. EBEI chose G&C

Equipment, a pure DBE supplier—one that never steps foot on the project site.

EBEI attacks Cronin from a glass house. Cronin will perform the same scope, in the same

manner, as G&C would perform for EBEI—except that Cronin would be on site daily, actively

coordinating material deliveries and performing other services. For this reason, alone, EBEI’s

protest should be rejected.

The only facts advanced by EBEI in support of its attack on Cronin concern the NAICS and

Work Codes presently assigned to Cronin. Again, EBEI misses the fundamental principle of the

DBE regulation set forth above: DBE compliance is an actual factual inquiry based on actual

DBE performance during construction. Having a particular code at bid time does not allow a

DBE to simply function as a useless pass-through entity with no active role or commercially

useful function. Likewise, not having a particular code at bid time does not impact what a DBE

actually does during construction, and how it does it. Cronin is an on-site member of HMS’

team, which is far more than can be said for G&C’s role on any project.

Cronin will: (1) assist HMS in preparing material and equipment submittals; (2) identify

acceptable manufacturers; (3) negotiate pricing; (4) pay for the materials; (5) take title to the

materials; (6) take possession of the materials; (7) deliver the materials to the jobsite; (8)

determine and be responsible for the security, quantity, and quality of the materials; and (9)

supervise the unloading and storage of the materials on site. This is far more than EBEI’s off-site

supplier would do. Cronin unquestionably will meet the requirements of the federal regulations

during performance of the work. For this reason, too, EBEI’s protest must be rejected.

EBEI’s Other Glass House—Bid Defects

Having submitted a higher bid by more than $2.24 million, EBEI’s bid is likely not under scrutiny

by Caltrans. Nonetheless, it must be noted that EBEI’s bid is sufficiently defective such that

EBEI would not be eligible for award even if it had been low on bid day.

First, contrary to the requirements of the DBE Commitment form, EBEI omitted work category

codes for all of its listed DBEs. (Tab 6.)

Second, EBEI’s traffic control listing contains a typographical or arithmetical error, which EBEI

could have relied on to pull its bid, post-bid, without forfeiting its bid bond. This is the type of

error that renders a bid unacceptable, as detailed below.

EBEI’s price for traffic control totals $394,219.00. (Tab 7, Item 4.) EBEI listed Maneri Traffic

Control for $236,531.40 (60 percent) and American Pavement Systems, Inc. for $11,826.57 (3

percent), for a total of 63 percent of that item subcontracted out. (Tab 6.) Without a

subcontractor for the remaining traffic control work, that work falls onto EBEI pursuant to Public

Contract Code section 4106. That, however, cannot happen. EBEI lacks the required license

classification to self-perform the other 37 percent of that work. Under California license law,

even A-License contractors are required to bring in C-31 Construction Zone Traffic Contractor to

perform that work.

Documents

HMS CONSTRUCTION, Inc. - California M S.pdf · HMS Construction, Inc. was the lowest responsive, responsible bidder for the above-reference ... determined only during and after contract