Why the D91 ‘no-bid contract’ issue isn’t actually an issue

Bateman-Hall’s statement on bidding question

In regard to the upcoming D91 bond discussion, Bateman-Hall’s name has repeatedly been brought up on the recent East Idaho News forum and by the D91 Taxpayers, who oppose the bond.

We would like to clarify misstatements made by the D91 taxpayers on that forum and provide information regarding our role as D91’s construction manager for the proposed bond projects.

Ms. Keller’s statement about Rigby High School costing around $32 million is grossly inaccurate. The total bond for Rigby was $45 million. The final construction contract was $37.5 million but does not include architectural, engineering, test and inspections, building permits, furniture and mobile equipment and several other district costs. District 91’s proposed Idaho Falls High School budget includes all of these costs. Also, she and her group have routinely omitted the fact that this proposed bond amount includes a major renovation to Skyline High School and repurposing of the existing IF High School to a career technical school. Coincidentally, Bateman-Hall was the contractor on the Rigby High School. D91 Taxpayers repeatedly only brings up this project as a comparison because it is an anomaly when comparing with all the local projects built before and after. Rigby was started 10 years ago, immediately after the market crash in 2008. Prices were extremely low. Even so, with price-escalation factors used on Rigby High School and other local more recent projects, estimates on Idaho Falls High School and all other projects in this bond are in line. We have repeatedly reached out to Ms. Keller so we can explain how the projected costs have been estimated and compare with her “sources.” We have spent many hours over the last two years using ours, and others, comparable data. We have strived to identify, quantify and value every element of the projects. She contends that her “sources” say otherwise. We are open to that discussion as it could only benefit the projects.

The selection of D91’s construction manager was conducted per the State of Idaho law regarding CM/GCs. Nearly every school district, if not all, in the state of Idaho are using the GM/GC method for construction. Locally and currently, Rigby, Madison, Teton, Aberdeen, and Bonneville are using this method. Likewise, several municipalities are using this method. Other States have been using it for many years. Private projects have been built using this method for many years also.

The term “no-bid bond” makes no sense. Bond consultants, architectural and engineering teams, and construction managers have always been selected based on experience and qualifications for professional services. There is nothing to bid until the project is designed. The fees are negotiated based on the amount of work necessary and comparable market rates. This has always been the process regardless of what kind of construction method is used.

All construction work is bid by numerous contractors.

Idaho Fall High School alone will have around 35 separate contracts awarded using the competitive bidding process established and enforced by state statutes.

Following are some unique differences between CM/GC delivery method and other methods.

With CM/GC:

• The construction manager’s fee is open record.
• All subcontract bids are open record.
• All costs are open record.
• All allowances/contingencies are open record.
• All allowances/contingencies not needed remain with the owner.
• The construction manager’s fee is NOT calculated on architectural and engineering, building permits, test and inspections, furniture and mobile equipment and any other district costs.
• The construction manager’s fee is negotiated by the district’s lawyer, NOT the school board.
• If a fee cannot be agreed on, the lawyer has authority to negotiate with the second-ranked CM/GC.
• The lawyer also negotiates a gross maximum price (GMP) that the contractor is held to. If the costs exceed that GMP, the excess is deducted from the fee.

With other methods:

• General contractor is not required to use the lowest-bid subcontractor.
• Can self-perform any part of the work without any bids from subcontractors.
• Not required to show subcontractor’s bid amounts or how many bids received.
• Not required to disclose their fees.
• Not required to disclose how much contingency is built in.
• Not required to give back any unused contingency.
• Not allowed to be involved in cost estimating to set the bond amount.
• Not allowed to be involved in design in order to suggest alternative means and methods to control costs and assure plan completeness. This leads to the potential of large change orders.
• Not allowed to participate in multiple building options to help determine the most feasible decision.
• The bond amount is set by architect using square-foot estimates, which creates enormous risk to the bond accuracy.

Bateman-Hall was one of five construction managers that responded to the district’s Request for Qualifications (RFQ). The responses include written proposes showing past experience with large school construction projects, financial capacity, litigation history, approaches to managing school projects, and other criteria. The district reserves the right to also conduct oral interviews, which they did with three finalists. A typical selection committee is made up of school administrators, staff and patrons from the community. After review, the CMs are ranked by a scoring system. The district’s lawyer begins fee negotiation with the top candidate. If an equitable and “market justified” fee cannot be agreed upon, the lawyer then starts negotiations with the second-ranked candidate and so forth. The competition is fierce and brings out the best attributes of each candidate. Over the past 43 years Bateman-Hall has participated in many of these proposals both in the public and private sector. We are very pleased when we are successful, but also satisfied that the process is fair when other great competitors are successful. We have built several high schools and other school projects in Idaho, and so has our competition. Eastern Idaho has great representation from quality contractors.

In regard to our fee, the bond opposition would have you believe that our 5.5 percent fee represents pure profit and would “line our pockets.” In reality, the fee includes all of our overhead over the nearly three years that these projects will last, not including the enormous amount of time spent to date. Our overhead includes salaries of the construction manager’s support staff, accounting, administration and estimating. Other overhead includes professional fees, property taxes, office supplies and equipment, automobiles and travel, advertising, rent, phones, etc.

Yes, we are a for-profit company. If we do not exceed the guaranteed maximum price, we hope to make a net profit. With this profit, we pay income taxes, set a portion aside for future growth, participate in employee profit sharing, and pay stockholder dividends.

We have also been accused of supporting the bond. Of course we support the bond. As part of our professional responsibility, we are to provide cost information, schedules, and be an advocate for our client and our community. As a company, we have not, nor ever will engage in discussions about tax rates, growth, and other items outside of the construction element. With that in mind, our company is made up of great employees, most of which live in the community. We have children going to these schools. We pay taxes in the District and serve in the community. We support each and every one of our clients and their interests. We also support other school districts that we have never worked for. We support community causes, many of which have absolutely no bearing on our financial interests. When we are asked to contribute to charitable causes, if it benefits our two community “missions” which are children and education, we are all in.

We have a standing invitation to anyone who would like to meet us or understand more about how we create the budgets and schedules pertaining to the D91 bond projects. We are located at 1405 Foote Drive and our phone number is (208) 523-2681. I can personally be reached at (208) 221-7349. It has been frustrating to sit by and have accusations thrown at us from nameless faceless individuals who appear to stay in the shadows for whatever reason. Having said that, I have always appreciated Ms. Keller for her willingness to be visible in these discussions.