Problem Solved: The lowest-bid contractor was hired but wasn’t vetted

Every building taller than six stories faces facade work at one time or another, and often that work is very costly. That’s when you need competent partners. Anita Konfederak has been overseeing facade work at a 17-story co-op where the board chose a low-bid contractor that she had concerns about.
When did you become concerned and over what?
Engineers and managers can recommend contractors, and so can a co-op board, based on past experience. On this particular project, we recommended some contractors, and the manager and board did as well. One of the bids was quite low, and that was the first trigger that made us worry a little bit.
Once the bids were in, did the manager or the board check the contractors’ references?
Yes. And as soon as we saw that the bid was low, we started the discussion with the contractor, asking him whether he had worked on similar projects in the past. In this particular case, the building would require a large pipe scaffold to be installed around it. The building needs a site safety plan, plus it has terra cotta on it. So those were the kinds of questions we asked to see whether the contractor has worked under these conditions and with these types of materials.
Unfortunately, we were getting answers that this contractor has not worked on a project of this scale in the past. So that was a big concern. First, we tried to straighten out the bid, and then we tried to flag to the manager that this is potentially a problem – that maybe even though this contractor has a great price, it might not be the one to hire for this project.
Did the board go ahead and hire the contractor?
Unfortunately, yes. They decided to take advantage of the low price, but currently we’re under construction and there are problems. There are some protocols that you have to follow in order to notify adjacent buildings, install the pipe scaffolding and complete the site safety plan. Those are difficult things to do, and an experienced contractor can usually take care of them within two to six weeks. Unfortunately, if a contractor is not experienced, there are stumbling blocks. For example, when installing the sidewalk bridge, this contractor wasn’t doing the due diligence to check if there’s a vault under the sidewalk. You can’t just put a sidewalk bridge with a heavy-duty pipe scaffold on top of it without checking if there’s a vault underneath because you might compromise that vault. Also, we ran into stumbling blocks where there were not advance notices to adjacent properties. So that delays the project. Many contractors hire outside firms to assist them with site safety plans, and of course how you protect the adjacent properties is also a factor. So if you don’t know all these things, it just takes longer, and as you know, more time means more money. So I highly recommend when you’re dealing with a larger project, you should deal with an experienced contractor.
So the contractor didn’t check if there was a sidewalk vault. How do you monitor that?
No matter what kind of contractor we’re dealing with – experienced or inexperienced – there’s some due diligence that we do. We as engineers start off in the beginning reviewing product data, shop drawings, insurances, a lot of documents. And that’s when we start to pick up things when they’re not done correctly or in a timely fashion. So a project starts to drag out because pre-documents are not done properly, and you have to go back and forth and educate the contractor on how to do them properly. And of course, the more time that we spend educating the contractor, the greater the cost to the owner.
Does this result in a lot of change orders?
Not so much for the site safety plan, but certainly during construction if they’re not experienced with the actual materials and repair methods. For example, it was very clear in the documents that on this particular project we wanted to have planking on every floor of the pipe scaffold so that we would have access all over the place at all times. This contractor bid that he was going to put planks on two levels and then move the planks as he goes along. Something like that delays a project because when you have to order terra cotta, you have to order well in advance, and you have to measure the stones. If you don’t have planks on the entire building the way the engineer dictated, then your order goes in later because you’re ordering the terra cotta piecemeal.
So then there’s a little argument: we want more planks, and he wants more money to put in those planks. The documents are very clear on what’s needed. He didn’t read the documents. So when dealing with an inexperienced contractor, those kinds of things come up during construction. Also, a typical contractor knows that an engineer wants to see the mock-ups on materials, procedures, waterproofing, membrane procedures and how to anchor stones. There are certain mock-ups and protocols that we do to get the project off the ground so that everybody on site knows how to do it correctly.
When you’re with an inexperienced contractor, he may go ahead and do something and close it up before we have an opportunity to see how he did it. And then we have to ask him to open it up, we have to double-check it. So these things can be avoided if, in the beginning, we’re very clear as to what we need.
This board hired an inexperienced contractor at a very attractive price. Is there anything a board can do to protect itself once it has made a deal with this kind of company?
Boards can protect themselves beforehand. In this particular case, the board did not do all the due diligence that we recommended. We highly recommend interviewing contractors, the three low bidders, even if it’s for only a half an hour prior to committing to starting work with them. So for example, during a quick interview, we would ask a few questions. How long have you been in business? Have you worked on similar projects in this area? We would ask those things during the interview, and then the board would be aware of all that.
In this particular case, there was no board interview with the contractor. So even though we had this gut feeling that we’re going to run into problems with this guy, the board might’ve gone purely for the price. So before hiring, it’s very, very important for the board to interview contractors, ask questions and get a good feeling.
You can also decide to get a performance bond if you’re going with a very, very low bidder who maybe doesn’t have a long track record with your type of project. You can pay for extra insurance, called a performance bond, that if this contractor defaults in some way, the insurance company would bring in a contractor to finish the job. It’s expensive but sometimes worth it when you’re going with a contractor that doesn’t have much experience.
And then what can the board do during construction? It’s nice if a board is involved, and sometimes there are construction committees set up by the board, one or two members. Sometimes there’s an architect or engineer on the board. It’s nice if those people come to the construction meetings and participate and see what’s going on so that they’re not surprised when they see that either their engineering cost is going up or their contractor’s asking for a lot of change orders. They can understand why those costs are coming.
What’s your takeaway for other boards?
Listen to your engineer. We’ve been doing this for 30 years. Take your engineer’s advice. They know what they have to face for the next few months with a bidder who is maybe incompetent or inexperienced. Engineers can save you a lot of grief in the long run.
Anita Konfederak is the senior vice president at Merritt Engineering.