As a way to ensure it receives attractive bids, the city of Lake Oswego will pay the top two losing bidders for a project to build a new wastewater treatment plant in the Foothills area.
During a meeting Tuesday, July 16, the Lake Oswego City Council voted 6-1 on a plan to pay the second and third place bidders $125,000 each. Council President Massene Mboup voted against the resolution. The city would also provide a payment of $250,000 to the top firm if it decides not to move forward with the project, which the council staff report said is “not anticipated.”
Earlier this year, the City Council parted ways with previous project partner, EPCOR, because the two sides couldn’t come to a price agreement and so the city is restarting the bidding process.
Project lead Stefan Broadus said at the meeting that providing the payment is a standard industry practice and reduces risk for potential project partners and incentives a more competitive process.
“Given what we have been through in this project so far, this makes really good sense and this is a critical project for the community and it’s not something we want to mess around with,” Mayor Joe Buck said at the meeting.
“We have to play the game and what’s more important is we have already been through this dance once and we need to show confidence to the marketplace that we are very serious about this project, that it is essential for this community to have this project and we want to give the best possible circumstances to get the best competitive bids we can,” Councilor John Wendland said.
Mboup felt the money could be put to better use and that the city is an attractive community and would receive quality bids anyway.
“For me it will be a waste of money,” he said.
Councilor Aaron Rapf said he initially was against the idea but changed his mind and posited that the city would save money in the long run because it would receive better bids.
The city staff report said that such payments aren’t needed for smaller projects and the city also did not commit to this idea in its previous bid solicitation effort. However, recently, the city switched from a model where the project partner would design, build, finance, operate and manage the plant to a model where the city will handle financing and the builder will do the rest. The city indicated that the current model adds more risk for potential project partners, thus necessitating the payments.
“For examples, the original DBFOM (design, build, finance, operate manage) procurement for the project did not include an honorarium (payments for second and third bidders) because proposers were not asked to commit to pricing at the time of the proposal, complete design elements, plan detailed construction logistics, or lay out 30 years of O&M (operation and management) in their proposal,” the city staff report reads. “Submitting a bid for proposal for any procurement is a business decision that incurs costs for these entities, but fixed price DBOM (design, build operate and manage) and similar models are on the next order of magnitude and thus an honorarium should be considered.”
The city must either update the existing water treatment plant or build a new one to meet environmental standards. It has decided to build a new plant in part because upgrading the current plant is projected to be more expensive.
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