PUBLIC HEARINGS

Harold Poulsen submitted applications regarding the following:

1. Annexation of the southerly portion of Lot 18, Block 2, GF 15th Addition.
2. Rezoning the .988 acres requested to be annexed from the current County "R-2" Low Density Residential District to the City "LB" Local Business, "C" Area District.

The subject vacant parcel to be annexed is located at the northwest corner of the intersection of 9 Street South and 17 Avenue South. The applicant intends to construct a medical clinic on the site involving a two floor building totaling 15,000 square feet.

The Planning Board conducted a public hearing on the annexation on July 24, 2001. No proponents or opponents spoke during the hearing.

At the conclusion of the public hearing, the Planning Board unanimously passed a motion recommending the City Commission annex the southerly .988 acres of Lot 18, Block 2, GF 15th Addition, subject to the following conditions being fulfilled by the applicant.

1. payment of all applicable fees owed as a condition of annexation approval including:
   1. Annexation Agreement Fee -- $200
   2. Resolution of Annexation Fee -- $100
   3. Storm Sewer Fee ($250/acre x .988 acres) -- $247
   4. Recording fees for Agreement and Resolution
      ($6 per page x the number of pages).
2. entering into an agreement with the City agreeing to the typical terms and conditions associated with annexation including:
   1. agreeing to install, within six months of occupancy of any building on subject property, standard City curb, gutter and sidewalk in the abutting portion of 17 Avenue South and sidewalk in the abutting portion of 9 Street South.
3. agreeing to participate in the costs of a public roadway lighting district and maintenance districts, lawfully created by the City.

These conditions have been met by the applicant.

Ordinance 2808 would assign a zoning classification of "LB" Local Business, "C" Area District, to the southerly portion of Lot 18, Block 2, GF 15th Addition.

Mayor Gray declared the public hearing open. No one appeared to speak in opposition to Resolution 9194 and Ordinance 2808. Jim Cummings, Thomas, Dean and Hoskins Engineering, spoke in support. There being no one further to address the Commission, Mayor Gray closed the public hearing.

Commissioner Jovick-Kuntz moved, seconded by Commissioner Beecher, that the City Commission adopt Resolution 9194 and approve the annexation agreement, both related to the southerly .988 acres of Lot 18, Block 2, GF 15th Addition.

Motion carried 5-0.

Commissioner Rosenbaum moved, seconded by Commissioner Beecher, that the City Commission adopt Ordinance 2808.

Motion carried 5-0.
 

OLD BUSINESS

Bids were received and opened for the Solids Handling Project for the Waste Water Treatment Plant on September 12, 2001. Due to the scope and technical complexity of the project, additional time was necessary to evaluate the bids and review required submittals. Staff recommended that the contract not be awarded to the lowest bidder. Agri-Systems, Inc. of Billings submitted the low bid of $8,414,999. Oswood Construction of Great Falls submitted the second low bid of $8,524,215. Dick Anderson Construction of Great Falls submitted the third low bid of $8,758,462.

Neil Consultants, the engineering firm retained for this project, and Montgomery Watson completed a thorough review of bid documents for completeness and correctness, a review of project references and related experience. After reviewing Neil's comments, staff concurred with the recommendation that the contract be awarded to the fourth lowest bidder, Sletten Construction Company for $9,297,000. State law allows contracts to be awarded to the lowest responsible bidder which may mean that the lowest bid not receive the contract.

In the past, staff has very seldom not recommended the low bidder. However, in this case, staff recommended that the contract not be awarded to the low bidder (Agri-Systems), the second low bidder (Oswood) or the third low bidder (Dick Anderson), but rather to the fourth lowest bidder (Sletten). The following were the key reasons for this recommendation:

Agri-Systems, Inc. was the apparent low bidder at the time of bid opening. A Bid Schedule error in extension of earthwork quantities, if allowed to be corrected, would place this firm as the second low bidder, above Oswood Construction Company at $8,558,124. Agri-Systems' Bid Form was submitted without a signature or a complete set of documents. In addition, Agri-Systems failed to provide a required instrumentation certification (I&C) letter with their bid. The Agri-Systems List of Subcontractors named only two subcontractor firms, ID Corporation (electrical) and Industrial Coatings (digester lining), implying a very high degree of self-performed work. Few construction contractors maintain the full range of in-house capabilities required to complete a complicated wastewater treatment project. No subcontractors were proposed for drilled shaft foundations, mechanical/plumbing, masonry work, painting, or roofing. Agri-Systems' construction experience appears limited to agricultural and food processing projects, and no wastewater treatment plant work was presented in their reference project list. Because of numerous bid irregularities and lack of relevant experience, staff could not recommend award of a construction contract to Agri-Systems, Inc.

Oswood Construction Company was the second low bidder at the time of bid opening at $8,524,215. Oswood submitted a letter requesting to have their bid withdrawn from consideration, stating an error in their bid preparation related to omission of temporary solids dewatering. It was not possible to determine the validity of this claim based on the bid documents. Oswood's recent volume and depth of construction experience does not appear to include projects that would serve as good preparation for the Great Falls project. In addition, Oswood failed to provide a required (I&C) letter with their bid. Because of the claimed bid error, concerns related to appropriate experience and a number of bid irregularities staff could not recommend award of a construction contract to Oswood Construction Company. In fact, staff concurred with their request to withdraw their bid.

Dick Anderson Construction was the third lowest bidder at $8,758,462.50. While the firm does not have an extensive background in similar sized wastewater treatment projects, they submitted an extensive list of reference projects ranging in value to over $18 million. Dick Anderson Construction failed to provide a required instrumentation certification (I&C) letter with their bid. Legal review by the City determined that omission of this document could not be waived as a minor bidding discrepancy. Because Dick Anderson did not provide the required I&C letter and had limited corporate experience in large waste water projects staff could not recommend award of a construction contract to Dick Anderson.

Sletten Construction Company was the fourth lowest bidder at $9,297,000. As part of the bid evaluation, Neil Consultants and Montgomery Watson performed reference checks both on projects performed by Sletten Construction Company as well as their proposed superintendent and project manager. Neil's findings indicated that both Sletten and their proposed project superintendent had extensive wastewater treatment construction experience on similar size projects. Reference checks on the company as a whole were positive with regards to fieldwork and quality of construction and negative with respect to office administration and paperwork. Sletten was the lowest qualified bidder to provide the required I&C letter and had only minor, non-critical bidding discrepancies. Based on the Bid Document review, Staff recommended the City Commission award the contract to Sletten Construction Company.

A recent Montana Supreme Court ruling (Debcon, Inc. v. City of Glasgow and Delta Engineering, Inc., 2001 MT 124) restated a long history of case law that the term "lowest responsible bidder" did not refer to pecuniary (financial) ability only, and included "judgment, skill, ability, capacity, and integrity" as well. Therefore, the City may reject the low bidder and award the contract to the next lowest bidder demonstrating such skill of "judgment, skill, ability, capacity, and integrity."

Seven bids were received and opened for this project. The bids ranged from $8,414,999 to $12,488,250. Sletten's bid of $9,297,000 was below the engineer's estimate of between $10-11 million. It was also well below the $13.4 million value of the SRF loan approved by the Commission on June 5, 2001.

Mayor Gray invited Public Works Director Jim Rearden and City Attorney Dave Gliko to provide background information on this issue. Mr. Rearden reiterated information found in the Agenda Report. Mr. Gliko explained the following:

* The Instrument and Controls document, or I&C letter, had a section of its own in the bid specifications which indicated this document was a material requirement. He added that the bid documents were very specific pertaining to the submission and requisition of the I&C document. On this same subject, Mr. Gliko stated there was some concern regarding the placement of the I&C documentation within the bid document. He stated that it was his understanding that requirement was not only given its own section within the bid document, but it was also discussed during the pre-bid conference.

* There was some concern expressed regarding the difference between the word "bidder" and the word "contractor." Mr. Gliko explained that the definition section of the bid document was quite clear in that they were terms used interchangeably.

* There was some concern regarding the use of a small letter "b" on the word bidder periodically throughout the document. Mr. Gliko explained that, again, that had no material significance in the bid document.

* Bid had ample notice as to what documents were to be submitted with the bid proposal. Dick Anderson Construction's omission of the I&C letter was a significant and material omission, and, therefore, Mr. Gliko concluded, their bid should not be considered.

*Another issue to consider was the experience requirement. Dick Anderson Construction could not cite another comparable project. Sletten Construction could.

Mr. Gliko closed stating that the bottom line to this issue was that the engineering firm of Neil Consultants recommended the bid be awarded to Sletten Construction and City staff concurred.

Mayor Gray asked for the direction of the Commission. Commissioner Beecher moved, seconded by Commissioner Rosenbaum, that the City Commission award a contract in the amount of $9,297,000 to Sletten Construction Company for the Waste Water Treatment Plant Solids Handling Project (OF 1176.1) and authorize the City Manager to execute the contract.

He then opened the floor for public comment. The following people addressed the City Commission on this issue:

Dick Anderson, 4410 Trihill Road, Dick Anderson Construction. Mr. Anderson formally protested the award of this bid to Sletten Construction and questioned the City Attorney's opinion regarding Dick Anderson Construction's experience. Mr. Anderson stated that Neil Consultant, in a draft letter to City staff, recommended that his firm be awarded the bid, however that letter was later withdrawn.

Mr. Anderson added that the Instrumentation and Certification letter was not a material item and argued that it was not even a requirement to be submitted on the bidder's checklist. He said that five out of the seven bidders did not include it with their bids and that five bidders interpreted the language of the bid document to mean that the subcontractor had to provide the letter to the contractor. It did not mean that the contractor had to submit it with the bid document. He added that for $500,000 (the difference between his and Sletten's bid) this was a silly requirement - a little thing at a great cost.

Mr. Anderson pointed out that Sletten's bid had irregularities to it as well, that it was not a clean bid. He asked why should the Commission pick one irregularity over another that will ultimately cost the City an additinal $500,000. He suggested the City Commission retain a 3rd unbiased party to review the bids and to provide an opinion.

Mr. Gliko responded to the issue raised by Mr. Anderson regarding experience by reading Neil Consultant's recommendation letter. He also stated that the City Commission could waive the I&C submittal requirement, however, that it would have to be applied to all bidders. Mr. Gliko then read the section in the bid specifications requiring the I&C letter. It stated that "the bidder shall submit..."

Commissioner Rosenbaum asked Mr. Anderson that if the letter was unimportant, why did he submit it a week later? Mr. Anderson stated he sent it in because he was called and was told it was a requirement to be submitted with the bid.

At this point, Mayor Gray handed the gavel to Mayor Pro-tempore Beecher because he had another commitment.

Doug Oswood, Oswood Construction, stated that this was a complicated issue. He expressed concern that the City Commissioners did not fully understand it. He said that each bid submitted for this project had something wrong with it. His concern rested with the integrity of the bidding process which did not involve, in his opinion, deciding which contractor had the least amount of mistakes. He stated that a bid with an error should be considered non-responsive and thrown out.

Mr. Oswood added that it was not acceptable to spend an additional $500,000 just because the total bid amount was under the engineer's estimate. He did not understand how the I&C letter could be singled out when five of the seven bidders did not submit it. He asked that if this was such an important item, why was it not included in the Instruction to Bidders document, rather than being buried in the back of the specification book.

He said that the experience requirement for this project could not be met by a single contractor in the State of Montana. He admitted that Sletten Construction was closest to meeting the experience requirement, but local contractors could not meet it. He asked the City Commission to either award the bid to Dick Anderson Construction or reject the bids and rebid the project.

Nick Oswood, stated that bidders listed incorrect manufacturers, and subcontractors. But to say that one error is more important than another sets a bad precedent.

Martin Becker, general counsel for Sletten Construction then addressed the City Commission. He stated that this was not a difficult or complicated issue. The I&C letter was a material specification outlined in the bid document. He added that an I&C Letter is always a requirement for waste water treatment bids and it was always in Section 17 of the bid documents. He asked how could it have been more clear? The specification book stated "each bidder must submit with the bid...."

He added that contrary to Mr. Oswood's opinion, there were several contractors in the State of Montana that could meet the experience requirements and reminded the City Commission that this was a complex project and required an experienced contractor.

Commissioner Hinz asked if the Commission were to reject the bids and rebid the project if that would bring with it an ethical problem?

City Attorney Dave Gliko advised that the Commission could reject the bids. However, he cautioned, that decision should not be exercised capriciously and must be based upon reason and logic.

Commissioner Jovick-Kuntz asked if it was too late to start construction this year. City Engineer Dave Dobbs responded stating that the first two steps involved earthwork and constructing the deep foundation structure which could be done because they weren't weather sensitive.

Commissioner Rosenbaum stated that he heard the Sletten Construction bid had errors in it to. He asked for clarification on that. Martin Becker, general counsel for Sletten Construction, stated that the only issue with the Sletten bid was the variable frequency drives. He added that all the bidders used the same subcontractor for this and everyone bid the same thing. He stated that this was a bid item that could be negotiated later if it did not meet the needs for the project.

City Engineer Dave Dobbs added that the bid documents stated adjustments on this item would be made after the contract was awarded.

Mayor Gray, at this point returned. However, the gavel was not passed to him, Mayor pro-tempore Beecher continued to conduct the meeting.

Commissioner Beecher asked if the I&C letter requirement was discussed during the pre-bid conference. City Engineer Dave Dobbs explained that it has not been confirmed because the minutes of the meeting were not complete.

Commissioner Rosenbaum asked if the variable frequency drives was really the only issue with the Sletten bid. Mr. Dobbs stated that there were critical errors in some of the bids - the experience issue and I&C letter, and there were non-critical errors - issues that could be negotiated and discussed and staff ultimately makes a decision. He explained to Commissioner Rosenbaum that the only item with the Sletten bid was a non-critical item.

Dick Anderson reiterated that everyone submitting a bid for the I&C letter was using the same subcontractor. The only difference was that his company did not send in a form with their bid.

Doug Oswood reiterated that every bid contained an error of some type and an error was an error.

Martin Becker restated Sletten's qualifications to do the job and reminded the City Commission that they were the only ones with the required experience that submitted a bid.

Commissioner Beecher stated that the City Commission had never discussed weighing the severity of errors or who submitted a bid with the most or fewest errors. He added that the Commission only discussed the experience and the requirement for the I&C letter. He added that he was not anxious to spend $500,000 more on the project but stated that staff's concerns had validity.

Commissioner Jovick-Kuntz expressed concern about a precedent being set if the Commission awarded the bid. She stated that all the bids had errors and she was leaning toward rejecting all the bids and directing staff to rebid the project.

Commissioner Hinz stated she was concerned about the integrity of the bidding process and spending an additional $500,000. She said she was leaning toward opposing the motion.

Commissioner Rosenbaum stated that the integrity of the bidding process was important. He added that in his opinion the Sletten Construction bid looked like a clean - most qualified bid. He concluded stating that if the other bidders were experienced with waste water treatment plan projects, they would have known about Section 17. He stated it was not necessary to rebid the project.

Mayor Gray stated he would support the staff recommendation. He added that experience was necessary to ensure a quality project. He considered three choices, to delay action, to rebid the project or to award the contract. He added that the rebidding option did not pass the "smell test" although he was troubled by Neil Consultants changing their recommendation. He added that he was also troubled by the ambiguity of the bid specifications coming before the City Commission. He explained that preparing bid specifications takes a lot of time and money and should be clear and understandable. In conclusion he stated that the City may be a target of litigation regardless of what the Commission chose to do.

There being no further discussion, Mayor Pro-tempore Beecher called for the vote. Motion carried 3-2 (Commissioners Hinz and Jovick-Kuntz dissenting). The gavel was passed back to Mayor Gray.
 

NEW BUSINESS

ORDINANCES/RESOLUTIONS

State law was changed during this past legislative session to allow local governments with code enforcement programs to adopt the most recent codes adopted by the State by administrative action. To do this, the local government must create an ordinance authorizing the adoption of a building code by administrative action containing at a minimum: (a) the type of codes which will be enforced; (b) the individual, identified by position title, who has the authority to sign the administrative action; and (c) whether the administrative action authority applies to discretionary provisions such as fee structures or the adoption of optional appendix chapters.

In the past, Administrative Rules of Montana required that local governments with a code enforcement program must within 90 days of receipt of notice, update the local codes to the latest codes adopted by the State. The codes adopted by local governments must be the same edition with the same amendments as those adopted by the State. Local governments must notify the State in writing when the updated codes have been adopted and are being enforced. Such adoption and notification may now be made by administrative action.

Past city commissions have questioned the necessity of holding public hearings on adopting ordinances for the latest codes, when in reality, they did not have a choice in the matter. The State agreed that it was a redundant process and has allowed, by administrative rule, that local governments may adopt the latest codes by administrative action.

Commissioner Jovick-Kuntz moved, seconded by Commissioner Hinz, that the City Commission accept Ordinance 2810 on first reading and set the public hearing and final reading for 7 pm, November 6, 2001.

Motion carried 5-0.
 

CONSENT AGENDA

Commissioner Beecher moved, seconded by Commissioners Rosenbaum and Jovick-Kuntz, that the City Commission accept the Consent Agenda as printed.

Motion carried 5-0.
 

BOARDS AND COMMISSIONS

Harold "Bud" Nichols resigned from the Civic Center Advisory Board; therefore, it was necessary to appoint one member to fill the remainder of his three-year term through December 31, 2001. Roger Pickens has also vacated his position on the board. Mr. Pickens' term runs through December 31, 2001. It was also necessary to appoint one member as his replacement. After advertising for applications for this board, only one application was received. It was recommended that the appointment at this time be made to replace Mr. Nichols and continue advertising for additional applications for Mr. Pickens' term.

Commissioner Hinz moved, seconded by Commissioner Beecher, that the City Commission appoint Arleen Heintzelman to fill the remainder of a three-year term ending December 31, 2001.

Motion carried 5-0.
 

CITY MANAGER

ADJOURNMENT