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Re: SEAoT LEGISLATIVE ALERT

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Liz Stansfeld wrote:

SEAoT LEGISLATIVE ALERT

On December 16, 2004, TxDOT released a document entitled "A Report to the Texas Legislature making recommendations to enhance the operations and functions of the Texas Department of Transportation." Essentially, this document sets their legislative agenda for the current session of the Texas Legislature. It has subsequently been distributed to every member of the Texas House and Senate. There are four recommendations, starting on Page 25, that should be of great concern to every engineer, architect and other design professional in Texas, including those that are not involved in transportation and TxDOT projects. I have included the offending recommendations below, verbatim. If any of these recommendations find their way into legislation, there will be a huge and costly battle between TxDOT and the design community. It would be better if these recommendations died before then. If you know any legislators, please contact them personally right now and explain why these recommendations do not represent good policy for Texas.

Respectfully submitted,

[BIG HONCHO OF SEAOT COMMITTEE REDACTED BY B. POLHEMUS]


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COMPETITIVE ENGINEERING CONTRACTING

QUALITY-BASED, BEST VALUE ENGINEERING PROCUREMENT

Background: All governmental entities are required to follow the qualifications-based selection procedures of the Professional Services Procurement Act. In the initial selection, value considerations are prohibited under law. Instead, a firm, or provider, is selected based solely on its qualifications, and then the price of the contract is negotiated with that firm to perform whatever professional architectural, engineering or surveying services may be required. If the provider does not agree to a price deemed fair and reasonable, price is negotiated with the second most qualified proposer. This process is not only lengthy, but may not always provide the best value to taxpayers. Price comparisons are prohibited by law. Based on projections by the department, more than $3 billion may be spent over the next ten years without the benefit of examining a
second offer.

The market forces that establish the true market value of a given service are substantially diminished when the buyer can only negotiate with one provider at a time and may not return to providers with whom they
have previously negotiated. Additionally, competition spurs innovation.

Proposed Remedy: The state could achieve efficiencies in time and expense if the Professional Services Procurement Act were amended to provide an alternative method of procuring engineering, architectural and surveying services. The commission does not propose to eliminate qualifications-based selection. However a market-based alternative that incorporates value in addition to qualifications should also be permissible. Once a list of qualified providers has been determined, then it should be statutorily permissible for the agency to solicit proposals from among the qualified providers to assist in selecting the firm that would provide the best value for the state. It should not be a requirement to simply accept the lowest bid. The agency should be able to consider all factors to ensure a high quality product that is delivered efficiently and that offers the
best value.

I understand this concern on the part of TxDOT all too well. The fact is that (with all due respect to our resident TxDOT supplier-of-services here on SEAINT--and he knows who he is) the providing of services to TxDOT and other governmental organizations in Texas is a "beltway bandit's paradise." Furthermore, it's a closed system. Because it is so lucrative, those who are able to vie for such contracts tend to be "the big boys" and most everyone else is frozen out. You have in essence a two-tier system within the OFFICIAL market for services: The PRIME consultants who tend to be the large, multi-office (even multi-state or even international) corporations, and the HUB (Texas-speak for what the Feds call an MBE; it stands for "Historically Underutilized Business," which is as poor a euphemism as ever was) consultants who are freely able to compete as long as a white male is only involved in the background.

Everyone else is pretty much shut out, and in true "beltway bandit" fashion (and with supreme irony) the "successful" contractors of professional services are not the best at engineering, but the best political insiders--at whatever level you happen to be. The proposal and interview process you have to go through in order to obtain work from TxDOT--even on relatively simple projects--is unbelievable, and it is NOT for those who can't afford a full-time marketing staff.

At the same time, one can see the problems resulting from a "price only" consideration of procurement of outside services with road and bridge construction. The most incompetent contractors representing potential cost and schedule overruns (based on prior history) are ALWAYS able to come back and bid again next go-round, because it is the mirror-opposite: ONLY price is the consideration.

This is a dilemma.

I prefer a third way.

I suggest that they dispense with the two tiers, get rid of affirmative action, get rid of the "wheel of fortune" mentality that causes the fat-cats in the big Tier One companies to say to the TxDOT contract administrators "Hey, Fred and Bob got theirs, it's OUR turn!", and truly open it up to competition. Price OUGHT to be considered but all the cards ought to be on the table.

A few years back, the slogan "$500 toilet seat" was in familiar usage to connote the typical waste and mismanagement of government procurement. Things haven't really changed. I'm all for a "free market" including the consideration of price, but the market ought to be TRULY free. I would like an opportunity to contract for this kind of work but it isn't worth it to me to have to do this much legwork when I know that I have a slim-to-none chance of obtaining it because I'm small (at present) and not politically connected.

PRIVATE ENGINEERING AND DESIGN CONTRACTS

Background: Current law requires that the department "use private sector engineering-related services to assist in accomplishing its activities in providing transportation projects." The department needs to use private engineering consultants and will continue to do so whether it is a statutory requirement or not. However, the commission does not feel it is appropriate to set arbitrary thresholds that do not correspond to
the level of need in any given year.

The level at which the department uses private consultants should be determined by an assessment at the district level of what projects can or cannot be accomplished by state civil engineers. The department would continue its efforts to make expenditures with historically underutilized businesses consistent with applicable law.

Proposed Remedy: Repeal Transportation Code, Section 223.041 setting an arbitrary level of expenditures
to be paid to private engineering consultants.

This will also rub against the grain. My experience indicates that private-sector consulting services (as it is presently procured and delivered) is probably MORE expensive than just having in-house TxDOT people doing the work. Ironically, one reason for this is the quality of TxDOT oversight.

I functioned for a time as a sub-subconsultant to a traffic engineering firm here in Texas, doing structural design for overhead signs and light-standards. This is NOT rocket science, and compared to the typical residential custom home it is simple. However, I found that I was constantly having to spend hours and hours of my time trying to jump through arbitrary hoops set by TxDOT personnel--some of whom were not even licensed professional engineers--in order to satisfy their elusive quality control criteria.

TxDOT people are used to NOT thinking in terms of cost-benefit, ironically. Their engineering people think nothing of spending inordinate amounts of time going over and over the same "engineering problems". It just never seemed to occur to the mid-level functionaries who were my contacts at TxDOT that time=money, and either I'm doing work for free or TxDOT (read: "the taxpayers") were going to have to pay me. This was NOT their problem as they saw it; there was a complete divorcement of project management and contract administration, and you had to deal with each head of the Hydra separately.

That is why I quite working for that client. It was simply not lucrative enough for me. I'm sure that the typical Tier One and Two types can make this work but again it requires 24/7 project and contract management on the part of the consultant to try to ram things through and make sure profitability is not affected. Being a small-fry, it just wasn't workable for me.

My own opinion is they ought to just let the TxDOT folks do this work in-house. It isn't rocket science, and it doesn't require a high-price beltway bandit to do the work that, in the meantime, TxDOT engineers are being paid for anyway. TxDOT did a study along this lines several years ago. It was seen as "feather-bedding" on the part of TxDOT, although not surprisingly that charge came most loudly from Consulting Engineering Counsel of Texas--the prime driver of the "privatization" legislation (a.k.a. the Beltway Bandit Enablement Act).

Both their houses ought to have a pox on them, but in the end I think given that TxDOT will always do things "the TxDOT way," it is probably best to just let them have it.

LOCAL AUTHORITY TO IMPLEMENT DESIGN-BUILD PROJECTS

Background: Current law precludes local governments from using design-build procurement in the delivery of transportation projects. Traditional public sector construction projects can be costly and time-consuming as agencies typically issue a request for proposals to hire an engineering firm to design the project (based on qualifications), and then repeat the process to hire a contractor to build the project (based on competitive bidding). The two-step public procurement process requires considerable management oversight and time, and can lead to miscommunication about design elements, costs, and responsibilities.

A single design-build contract offers: a single-point of responsibility and accountability, team ingenuity, public/private partnerships, access to new technologies, and greater cost and time savings.

Proposed Remedy: Amend the Local Government Code to provide an alternative method of project delivery that authorizes municipalities and counties to procure engineering and construction services similar to what is authorized for TxDOT in Transportation Code Section, 361.302 et seq. Local governments would
use a competitive procurement process that provides the best value.

This makes sense to me because, ironically, it also works in the private sector.

However, TxDOT management will NEVER figure out how to make this work because in the end they set the processes, and they are NOT quick studies when it comes to change.

Sounds good on paper, but it will never work unless all TxDOT personnel with more than eight years of service are summarily given early retirement and completely new people brought in for whom "the TxDOT way" has no meaning.

AUTHORITY TO ESTABLISH OVERHEAD RATE CEILINGS AND COMPENSATION LIMITS

Background: In order to better inform consulting engineers of rates and compensation levels, and to administer the department's engineering procurement process as efficiently as possible, the commission recommends that the department be able to establish overhead rate ceilings and personnel compensation limits. There is no evidence that among the thirteen states currently using such procedures, that these ceilings are onerous. In Texas these rates are currently negotiated on a contract by contract basis.

Proposed Remedy: Amend the Professional Services Procurement Act to authorize procuring agencies to
establish overhead rate ceilings and personnel compensation limits.

Again, probably a practical idea.

Funny. Here I am, a "big government" opponent, who thinks that the private sector can't do this work very well on balance. It's just that I know that what typically happens isn't "private sector work" at all, it's all "Beltway Bandit" style. Government contractors are part and parcel of the problem with the cost and size of government. Government wouldn't be as big as it is without large parts of the "private sector" benefitting from process.

That's my opinion. YMMV.

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