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April 19, 2014

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Companies, city officials scrutinize how Vegas awards contracts

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Steve Marcus

APCO Construction’s $11.5 million mob museum contract bid survived a legal challenge from a competitor over the city’s bidding practices.

Over the past decade, the process Las Vegas has used to award hundreds of millions of dollars in city contracts has been a quiet one, with few protests from losing bidders and even fewer spats among City Council members over the contracts.

With the economy tightening and companies scrambling harder than ever for work, that has changed.

In two recent cases, the city’s purchasing and bidding procedures have been put under the microscope by angry company officials who have claimed the city’s process is broken.

The scrutiny and calls for change haven’t stopped there. Council members, in rare public displays of exasperation, have chastised city purchasing officials and bickered with each other over whether contracts are being awarded to the lowest-priced — and most competent — bidders.

“The process, it’s not broken, but I’ll tell you this: It can be improved,” Mayor Oscar Goodman said at his most recent news conference. “The staff has been directed to improve it.”

The city annually spends about $300 million to $400 million on products, services and construction contracts.

In fiscal 2009, the purchasing department sought on 70 contracts, including 37 for goods and services and 33 for construction, said Kathy Rainey, the city’s purchasing and contracts manager.

Two of those bids proved to be controversial, including one for the $11.5 million renovation of the downtown building that is the planned site of the mob museum.

The city first solicited bids for that job in September. Flagship Construction was the low bidder, but APCO Construction challenged the award, claiming Flagship wasn’t qualified to do historical renovations.

Rainey’s team then sought a new round of bidding with more detailed specifications. APCO won as the lowest bidder found also to be “responsive and responsible.” Flagship protested, claiming, among other things, that the first round of bids should not have been thrown out.

The council backed its award to APCO, spurring Flagship to file suit. Flagship lost.

More recently, the city Purchasing Department awarded a $1.6 million contract for food services for the city’s jail to the third-lowest bidder — an unusual result.

It irritated several members of the council.

The award went to Institutional Foodservice Management instead of two companies that offered bids of about $200,000 less, Philadelphia-based Aramark and Jimmy’s Cheyenne Market in North Las Vegas.

The purchasing department determined that Jimmy’s market did not meet bid specifications and had no experience of the scope required by the jail contract.

The second-lowest bidder, Aramark, clearly has the requisite experience — it provides food service at the Clark County Detention Center and has hundreds of similar contracts nationwide.

But city officials found that on four occasions from 2005 to 2008 the Southern Nevada Health District lowered Aramark’s grade from an A to a B or C.

The health district found that sewage wasn’t properly disposed of, foods weren’t protected from contamination by other foods such as raw poultry, and food workers either failed to properly wash their hands or couldn’t do so because of a lack of “suitable” facilities.

“The last thing we needed to have done is contaminate people” because the city wanted to save money on a food contract, said Mark Vincent, the city’s finance director. “It’s not just prisoners who eat that food, but corrections officers too.”

An Aramark official, Karen Russell, lobbied council members at the last minute. But at Wednesday’s council meeting, City Attorney Brad Jerbic told Russell that her meetings didn’t constitute an actual bid protest, and because Aramark failed to post a $250,000 “protest bond” within five days of the award, as required by state law, Aramark had given up the right to protest.

Aramark spokeswoman Sarah Jarvis said Aramark had improved its performance at the county jail when reprimanded.

“We immediately made whatever corrections needed to be made,” Jarvis said. “We’re very proud of our performance there.”

At the Wednesday meeting, Councilman Gary Reese expressed concern that it appeared the city had been choosing more expensive bidders over cheaper ones — and that council members were the last to learn of the city’s decisions.

“This has happened over and over and over again,” he said.

In the end, Reese voted for the contract, but two other councilmen, Stavros Anthony and Steve Ross, did not. Anthony said the city was passing up needed cost savings.

Rainey and Vincent argue that they are strictly bound by state laws when evaluating and awarding contracts. The process, they say, generally goes like this:

An advertisement is taken out by the city, and bidders are invited to a pre-bid meeting with a purchasing department representative. This is bidders’ main chance to ask questions.

Companies weighing a bid are then given a deadline by which they may file a bid. The bids are read publicly.

Rainey’s purchasing staff then begins its evaluation, which sometimes includes the involvement of the city department that requested the bid.

State law mandates that the lowest “responsive and responsible” bidder be declared winner of the contract. So staffers first look at the lowest bid to see whether other criteria are met.

“Responsive” simply refers to whether all the paperwork has been properly filed.

“Responsible” is more subjective. Basically, the city is charged with investigating whether the bidder can do the job, is generally competent and is a good-faith actor.

According to Goodman, the fixes he wants are to simplify the bid application and to spell out as clearly as possible during pre-bid meetings so there are no unanswered questions.

But he conceded the city may face more protests in this economy.

“Everybody’s looking at everything very closely,” Goodman said. “It’s a challenging time and they’re going to be challenging the process.”

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