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There is a great article in the Valley Morning Star about a bid bond requirement that backfired.  The city of Harlingen asked for a bid bond to go along with the bid requests for renovating the local pool.  There were a lot of companies that were interested in the bid packets, but only a single company actually bid on the project.

That company, South Texas Pool, did not even provide a bid bond with their bid proposal.  Now, the city staff is going ahead and asking the city commission to waive the bid bond requirement.

This is a great example of how a bid bond isn’t always in the best interest of the city.  Instead of protecting the city, it has instead driven away plenty of contractors that could perform the job.  Further, the bid submitted was fairly expensive.

We tell all of our clients to have a bid bond ready so that they can bid these types of jobs.  Think about it: if you were a pool company and had submitted a bid for this job, along with the bid bond that was required, you could have asked for even MORE money and would have received the job.

http://www.valleymorningstar.com/news/local_news/article_7cff502c-fe95-11e4-b814-b77b3e82034f.html

City asked to waive bid bond on pool project

HARLINGEN — Lack of interest in renovating the Lon C. Hill Pool could lead the City Commission to waive the bid bond, city documents show.
City staff has asked for authorization to contract with South Texas Pools to complete the proposed renovations through the process of “value engineering” and to waive the bid bond.

The commission will consider this at its meeting today, starting at 5:30 p.m. at City Hall, 118 E. Tyler Ave.
South Texas Pool’s base bid is $277,000, but with possible alternates, it increases to $393,640, public records show.
According to background being presented to the commission, Community Development Director Tammy DeGannes noted that 30 companies picked up bid packets for the proposed renovations, but only South Texas Pools submitted a bid, but not a bid bond.
DeGannes noted in the summary that the city had unsuccessfully requested proposals and sealed bids on three occasions. The proposed improvements include replacing the concrete decking, all plumbing, filters, pumps, skimmers, main return lines and other related structures. Bid alternates include installation of a new enclosure fence, installation of deck coating, and the demolition and proper disposal of the existing deck and fixtures.

She proposed that the project be conducted through “value engineering,” meaning, she said, that the city would eliminate or modify elements that are not essential to the project or add elements — all with the aim of improving the quality and performance of the facility, while bringing the project within budget constraints.  She noted that South Texas Pools did not submit a bid bond. Her summary states: “On large projects, a bid bond is usually requested, however it was not required on this project.”

This could be in error as the notice to bidders that was still posted Tuesday on the city’s website notes: “A bid bond in the amount equal to five percent (5%) of the bid must be submitted with each bid.”  DeGannes’ summary does point out that, “A bid bond is important to show proof of guarantee to the project owner that the bidder can comply with the bid contract. Most often it is required to prohibit frivolous bids. A bid bond is a guarantee that the bidder has the capability to take on and implement the project, if selected.
“If the bid bond obligations are not met, the contractor and the surety company that wrote the bond are liable for the bond jointly and severally,” the summary states, adding that there are penalties for failure to comply with bond obligations.
The summary further notes: “Since the project will be covered by a performance and payment bond, staff requests that the formality of a bid bond be waived.”

The summary also notes that funds were not specifically designated in the current budget for the full amount, but that monies would be reallocated from housing rehabilitation to cover the costs of the project.

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