City of Oakland As-Needed Paving Contracting, Winter 2022

TIMELINE

What follows is a timeline of these bidding processes and anticipated next steps.

• August 27, 2021: The City advertised three as-needed, low-bid paving projects with total engineer’s estimated value of $30.5 million: Project 1006103, $13.5m; Project 1006104, $13.5m; and Project 1006105, $5.1m. The third, smaller contract was bid out based on feedback that perhaps a smaller contract could lead to a different competitive outcome.
• September 30, 2021: The City received 10 bids as part of the three as-needed paving projects (Project 1006103: 3 bids, 1006104: 3 bids & 1006105: 4 bids).
• November 8, 2021: Analysis performed by the City’s Department of Workplace and Employment Standards (DWES) in November 2021 found that none of the 10 bids on the three projects achieved full conformance with the LBE/SLBE program, which calls for 50% LBE (any size) overall participation (exclusive of specialty items), 25% Small / Very Small Local Business Enterprise (S/VSLBE) overall participation (exclusive of specialty items), and 50% LBE (any size) trucking participation. The compliance memos for all three projects are in a single PDF document and can be found here.
• December 2021: OakDOT (Oakland Department of Transportation) staff worked to develop a proposal that would award contracts to the lowest bidders as well as other bidders willing to match the low bid for Project 1006103. This proposal was consistent with past practice, providing the benefit of having multiple contracts issued, protection against contractor performance issues, and higher overall capacity to deliver paving in spring and summer 2022.
• January 18, 2022: City Council considered the staff recommendation (documentation available on Legistar here). City Council did not take action on the recommendations for contract awards, instead directing staff to return to the Council with a resolution rejecting all bids as composed at the time, and authorizing staff to negotiate with the bidders to achieve bids compliant with the L/SLBE program requirements.
• Week of January 24, 2022: Upon further review, it was recognized that the prior City analyses did not accurately account for “specialty items.'' Specialty items are those in which a "rule of three" applies: if there are not more than 3 vendors or suppliers to provide the service or material supply, the City’s L/SLBE program excludes the bid total for these specialty items from the L/SLBE participation calculations. The City’s L/SLBE program excludes this material from the calculations, assessing the percentage of L/SLBE participation against the total contract bid amount, less the specialty items (effectively: the denominator in calculating the percentage). The November 8, 2021 analyses only considered one of the two items identified as specialty items in the bid documents. These items (asphalt concrete and asphalt concrete for base repair) should have both been deducted from the bid totals. Instead, L/SLBE contracting participation was measured against an incorrectly large total denominator, giving an erroneously lowered participation percentage. With this error corrected, DWES reviewed all bids closely and determined that one of the original bid was responsive to the City's L/SLBE policy. In this case, that term largely refers to asphalt and concrete material. In the November 2021 analyses, there were two lines of specialty items, one of which was included in error as contributing to that denominator – so that local contracting participation was measured against an incorrectly large total denominator, giving an erroneously lowered participation percentage. DWES reviewed all bids closely and determined that one of the bidders met all requirements. Revised compliance memos were issued by DWES on January 28, 2022. Links to those memos can be found here (Project 1006103), here (Project 1006104), and here (Project 1006105).
• Week of January 31, 2022: Staff then followed City Council direction to negotiate with the two remaining non-L/SLBE program compliant bidders with a goal to produce revised bids compliant with the participation goals.
• February 2022: City staff are working to expeditiously bring the results of Council-authorized negotiation to completion, and will return to Council to consider next steps and recommendations. Staff anticipate this item to be agendized for either the February 15, 2022 meeting or the March 1, 2022 meeting of the City Council. Finalized documents will be posted here and the City’s Legistar system as they are completed.
  

ADDITIONAL BACKGROUND

On December 21, 2021, City Council approved the Five-Year Paving Plan (Resolution No. 88975 C.M.S.), which identified 350+ miles of pavement rehabilitation and preventative maintenance citywide to be completed within five years. In June 2021, City Council approved the Fiscal Year (FY) 2021-22 Capital Improvement Plan (CIP). The CIP funded the paving program at $57.5M per year using Measure KK General Obligation Bond funds. Measure KK was approved by the voters of Oakland in November 2016 to fund $600M of vital infrastructure maintenance improvements, including $350M for streets and sidewalks.

For the past three years, the City of Oakland has implemented its paving projects primarily using as-needed pavement rehabilitation contracts. As-needed contracts lock in unit pricing for multiple projects, and projects are assigned on a work order basis. This is helpful, as staff can estimate exactly how much a particular project will cost, versus going to open market where costs may be higher than estimated. As-needed contracts also reduce peaks and valleys in design staff output. Rather than loading a year’s worth of paving plans into 6 months out of the year, paving can occur throughout the calendar year. Additionally, as-needed contracts allow for more flexible construction schedules and enable the City to take advantage of various opportunities that are difficult to plan for, such as utility coordination.

In May 2021, through Ordinance 13647 C.M.S., City Council enacted changes to the Local and Small Local Business Enterprise Program(L/SLBE) requirements. Among these changes was an adjustment to how Local Produced Goods are counted toward a bidder’s local business participation and related bid discounts. Previously, Local Produced Goods was counted as S/VSLBE participation; now it is counted toward Local Business Enterprise (LBE) participation. Failure to meet the local participation thresholds as detailed in the L/SLBE requirements can result in a bid being deemed non-responsive.

FREQUENTLY ASKED QUESTIONS

This section will be updated with answers to questions the City receives regarding this matter.

Question: What will these contracts be used to do?

Answer: OakDOT has been ramping up paving delivery for several years, and for the last two years has broken paving records -- with essential support from paving contractors. As of February 2022, there is approximately $5 million of capacity remaining in existing contracts, which can deliver roughly 5 miles of paving in spring and summer 2022. With the capacity these contracts would provide, OakDOT hopes to deliver 45 additional miles of paving, including approximately 20 miles to complete delivery of the equity-driven 2019 Three-Year Paving Plan and an additional 25 miles to begin delivery of the recently-adopted 2022 Five-Year Paving Plan.

Question: Are the three prime contractors in the above-referenced bids certified Local Businesses?

Answer: Yes. McGuire and Hester, 10/8/2021; Oliver DeSilva, Inc. dba Gallagher & Burk, Inc., 12/31/2020; and O. C. Jones & Sons, Inc., 8/13/2020. The City of Oakland's Local and Small Local Business Enterprise Program maintains a searchable database of certified local businesses that can be accessed here.

Question: To whom have recent paving contracts been awarded, and by what process?

Answer: The City Administrator was given $35M in contract award authority on 5/21/2019 by City Council Resolution No. 87704. That authority was increased by $75M on 12/21/21 by City Council Resolution No. 88976. However, most recent paving contracts have still gone to City Council for approval by resolution: