Transcript No Slide Title

TEA 2003 Presentation
Burlington, VT
September 5, 2003
Anti-Collusion Tactics:
How to Wage the War
Jim McClave & Wick Heath
Info Tech, Inc.
Copyright © 2003
Tactical Strategies
•
•
•
•
•
Know Your Contractors
Improve Your Estimates
Punish Unbalanced Bidding
Facilitate Long-Range Bidding
Fight Monopolization
Copyright © 2003
Know Your Contractors
•
•
•
•
•
Who is the Contractor?
What does the Contractor do?
Where does the Contractor do work?
When does the Contractor have capacity?
How does the Contractor bid?
Copyright © 2003
Who is the Contractor?
• Determine all related Affiliate Contractors
& Material Suppliers
– Data Sources: Prequals & Sec’y of State
– Who are the officers?
– Similar addresses, telephone numbers?
– BAMS/DSS: Do they bid against one another?
• BAMS/DSS Analysis: Treat affiliates as
one entity
Copyright © 2003
ORGANIZATIONAL LINKS
Company
Officer Name
Position Vendor
Norwood Bridge Co
Norwood Bridge Co
Norwood Bridge Co
Slappy Jones
Earnest Smith
Larry D. Conroy, Jr
Pres
sec/tres
VP
Beachwood Excav Co
Beachwood Excav Co
Beachwood Excav Co
E.W. Jones III
E. Dalton Smith
Snuffy Conroy
Pres
sec/tres
VP
Jones, E. Wilton
E. D. Smith (Itchy)
Conroy, Danny
Pres
sec/tres
VP
Ironwood Paving Co
Ironwood Paving Co
Ironwood Paving Co
06085
06741
06849
What are the Affiliate Relationships?
Contractor Name
HOOKER CREEK ASPHALT & PAVING, LLC
COATS CONSTRUCTION, L.L.C.
DESCHUTES READY-MIX SAND & GRAVEL CO ABN OF ROBERT
R.L. COATS
HOOKER CREEK ASPHALT & PAVING
Address
POBox
3225 N.W. SHEVLIN PARK ROAD
63101 NELS ANDERSON ROAD
1008
2975 SKYLINE RANCH ROAD (97701) 1008
2975 SKYLINE RANCH RD. (97701)
1008
63101 NELS ANDERSON RD
ZIP
57701
57709
57709
57709
57701
Tel #
541-322-5700
541-389-0981
541-382-5368
541-382-5368
541-322-5700
What does the Contractor do?
• Determine the Contractor’s Capabilities
and Resources
– Data Sources: Prequals & BAMS/DSS
– What type of work does the contractor do?
– Does the contractor own material facilities? If
so, to whom does it sell materials?
– Who are the Contractor’s subs?
• Is the Contractor both Prime & Sub?
– To whom does the contractor sub?
Copyright © 2003
Where does the Contractor do work?
• Determine where the Contractor Operates
– Data Sources: Prequals, BAMS/DSS &
Internet
– Where are the contractor’s facilities located?
– Does the contractor have & utilize portable
facilities?
– How does contractor’s bid market compare to
its work market?
• Does the Contractor “respect” others’
markets?
Copyright © 2003
ACTIVITY OF: JOHN R. JURGENSEN
Asphalt
Copyright © 2003
WIN
LOSS
BID & SUB
SUB ONLY
FACILITY
ACTIVITY OF: SCHLOSS PAVING
Asphalt
Copyright © 2003
WIN
LOSS
BID & SUB
SUB ONLY
FACILITY
ACTIVITY OF: OLDCASTLE / SHELLY
Asphalt
Copyright © 2003
WIN
LOSS
BID & SUB
SUB ONLY
FACILITY
When does the Contractor have
Capacity?
• Track the Contractor’s work on hand vs.
its capacity
– Data Source: Prequals & BAMS/DSS
– Is the Contractor hungry or full?
– Do historical patterns suggest timing of
aggressive bidding?
– Will long-range scheduling of projects
increase level of competition?
Copyright © 2003
Capacity Analysis
$9,000,000
$8,000,000
$7,000,000
$$/Month
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
EA
T
ER
G
R
M
PL
E
TE
G
EN
SA
N
&
C
O
LA
KE
S
R
U
H
LI
JU
N
R
G
SM
EN
IT
SE
H
N
&
JO
H
N
SO
N
C
J
AN
M
AH
TH
AN
O
N
Y
AL
LE
G
A
KE
N
M
O
R
E
BE
AV
ER
BE
C
D
M
IR
IL
LE
R
BR
O
E
S
S
W
AG
N
ER
AL
S
D
O
C
EL
LY
EL
LY
SH
SH
N
H
JO
E
S
KO
KO
SI
N
SO
N
G
$0
Avg Backlog
Copyright © 2002
Backog Jul '03
Avg Backlog Jul - Dec 03
Avg 2004
How does the Contractor bid?
• Develop a knowledge of the contractor’s
bidding behavior
– Data Source: BAMS/DSS
– Is the contractor an aggressive bidder?
– Does the contractor submit comp bids?
– Does the contractor have “bidding partners”?
– Is the contractor’s bidding behavior
consistent across markets?
Copyright © 2003
VENDOR COMPETITION
MATRIX
Apha Asp
Delta Asp
Bravo Asp
Charlie A
Alpha Asp
301 .768
97 .322
214 .711
59 .276
195 .648
56 .287
164 .545
51 .311
Delta Asp
214 .775
68 .318
276 .704
112 .406
165 .598
47 .285
147 .533
56 .381
Bravo Asp
195 .871
58 .297
165 .737
51 .309
224 .571
68 .304
126 .563
35 .278
Charlie Asp
164 .759
39 .238
147 .681
33 .224
126 .583
33 .262
216 .551
49 .227
No. of Wins
VENDORS
327
OTHERS
65
TOTAL
392
Tactical Strategies
•
•
•
•
•
Know Your Contractors
Improve Your Estimates
Punish Unbalanced Bidding
Facilitate Long-Range Bidding
Fight Monopolization
Copyright © 2003
Improve Your Estimates
• Study price trends
• Fight item proliferation
• Beware of chasing prices on bid-based
estimates
• Use cost-based estimates at least on
major items
Copyright © 2003
Study Price Trends
• How do prices vary seasonally?
• Are prices affected by level of work in the
market?
• How do prices compare across markets?
• How do your prices compare to national
trends in prices?
– Data Sources: Bureau of Labor Statistics &
BAMS/DSS
Copyright © 2003
Ohio Department of Transportation
100
90
Price ($'s)
80
70
60
50
0
5,000
15,000
20,000
25,000
Quantity (Cubic Yards)
Copyright © 2003
Market
10,000
CENTRAL
SE
CINCY
SOUTH
CLEVELND
TOLEDO
COLUMBUS
Estimates, Index and Actuals
$33.00
$32.00
$31.00
$30.00
$ / Ton
$29.00
$28.00
$27.00
$26.00
$25.00
$24.00
$23.00
98
99
00
Estimate
US Index
01
Actual Perf
02
Ohio Department of Transportation
90
80
Price($'s)
70
60
50
40
30
1997
1998
1999
2000
Year
Price
Copyright © 2003
Asphaltic (bituminous) concrete
Construction sand and gravel NC
Crude Petroleum(PCU1312#1)
Ohio Weighted Average Price
2001
2002
Oregon Statewide Asphalt Prices
Mil MG: 1.6
1.5
1.8
1997
1998
2.4
0.9
1.4
2.5
2001
2002
50
45
Price($'s)
40
35
30
25
20
1996
Copyright © 2003
Price
1999
2000
Year
Asphaltic (bituminous) concrete
Oregon Weighted Average Price
Fight Item Proliferation
• Map new items in new spec year to old
item list
• Require detailed justification for new item
creation – fight artistic tendencies
– Makes bid-based estimation nightmarish
– Can’t compare prices across markets or time
– Provides contractors with another “degree of
freedom”
Copyright © 2003
ITEM PROLIFERATION
50%
40%
30%
20%
10%
0%
1
2-5
6-30
31-100
Number of times item used
> 100
Beware of Chasing Bid Prices
• Track bid-based estimate trends
• Compare price estimates across markets
– are differences justified by costs?
• Compare price estimate trends to national
price trends
Copyright © 2003
Line Item Profile
– % Over Low Bid
St. Louis New Construction
CONTRACT=920731-04
BID=$2,586,355Estimate:
EST=$2,233,859 PANEL=1
OF 1
Winning
Bid: $2,586,355
$2,223,859
8
7
6
$155,200
5
% 4
O 3
F 2
B
I
D
T
O
T
A
L
1
0
-1
-2
-3
-$77,600
-4
-5
-6
-7
Rem
Mobil
Excav
Temp
Traf
Sig
2022010 2031000 2036000 3012000 3040343 5021210 6132000 6161005 6161020 6181000 9029400
VENDOR
VENDOR
Generated Item Number
00 **ESTIMATE**
01 WEST
00 **ESTIMATE**
01 WEBER INC., F
02 BROTHERS
02 9910109/ BANGE
Line Item Profile
–New%Construction
Over Low Bid
St. Louis
CONTRACT=940128-22 BID=$4,864,378 EST=$4,237,157 PANEL=1 OF 1
Winning
Bid: $4,864,378 Estimate: $4,237,157
11
$486,400
10
9
8
%
7
6
O
F 5
4
B
I 3
D
T 2
O 1
T
A 0
L
-1
-2
-3
-4
Mobil
Excavation
-5
-$243,200
2022010 2031000 2032000 2036000 2063000 3012000 5021109 5021210 6091060 6181000 7032010 8061016
VENDOR
00 **ESTIMATE**
VENDOR
00 **ESTIMATE**
Generated Item Number
01 BROTHERS
01 9910109/ BANGE
02 WEST
02 WEBER INC., F
Line Item Profile
– % Over Low Bid
St. Louis New Construction
CONTRACT=960426-11
BID=$14,165,733
EST=$11,310,108
PANEL=1 OF 2
Winning
Bid: $14,165,733
Estimate:
$11,310,108
9
Panel 1 of 2
8
$1,133,200
7
6
%
5
O
F 4
B
I
D
T
O
T
A
L
3
2
1
0
-1
-2
-3
-4
2021052
Rem Imp
Rem Asp
2022010
2024010
VENDOR
Asph Agg
2031000
00 **ESTIMATE**
VENDOR
00 **ESTIMATE**
2061000
4031026
4037110
Generated Item Number
01 BROTHERS
01 9910109/ BANGE
4037200
-$566,600
4038992
4038993
02 PAVEMENT
02 9910236/ MISSO
Line Item Profile
– % Over Low Bid
St. Louis New Construction
CONTRACT=960927-06 BID=$3,854,000 EST=$5,938,862 PANEL=1 OF 1
Winning Bid: $3,854,000 Estimate: $5,938,862
$1,541,600
40
30
%
O
F 20
$770,800
B
I
D
T
O 10
T
A
L
0
-10
Excav
2035000
Mobil
2036000
VENDOR
2063000
00 **ESTIMATE**
VENDOR
00 **ESTIMATE**
03
03WEST
WEBER INC., F
6181000
7261442
7261472
Generated Item Number
01 INTRUDE
01 BERRA CONSTRU
04 MCTAVISH
04 FREESEN
INC.
7261484
9999999
02 SPENCERS
02 KOLB GRADING
GRADING
05 VERNACI05CONST
Use Cost-Based Estimates
• Provides sanity check on major items
• Establishes a benchmark for future bidbased estimates
• Market inquiries by DOT can have positive
impact on prices
Copyright © 2003
Tactical Strategies
•
•
•
•
•
Know Your Contractors
Improve Your Estimates
Punish Unbalanced Bidding
Facilitate Long-Range Bidding
Fight Monopolization
Copyright © 2003
Punish Unbalanced Bidding
• Use collapsed items – combine materials
and labor
• Run and analyze LIP’s immediately after
bid-openings
• Establish a proactive Bid Review &
Awards Committee
• Reject materially unbalanced bids
Copyright © 2003
Oregon Department of Transportation
Line Item Profiles
CONTRACT=12061 BID=$1,817,940 EST=$2,147,593
% OF BIDTOTAL
30
3
4
5
E
20
3
4
5
E
10 5
3
2
E
4
0 1
5
3
2
E
1
4
5
3
E
2
4
1
E
5
1
4
2
3
5
4
E
1
2
3
-10
1
2
5
E
4
1
2
3
E
4
3
0
7
4
5
.
0
0
7
4
5
.
0
a
a
-20
0
2
1
0
.
0
Copyright © 2003
vendor
0
2
2
5
.
0
0
2
2
5
.
3
0
2
2
5
.
7
0
6
4
1
.
0
2
1
2
1
5
1
4
E
3
2
0
7
4
5
.
0
a
b
0
7
4
5
.
0
a
c
0
7
5
9
.
0
5
Generated Item Number
E E E 00 **ESTIMATE**
1 1 1 01 KLAMATH PACIF
2 2 2 02 80251/ROY L.
3 3 3 03 J.C. COMPTON
4 4 4 04 LTM INCORPORA
5 5 5 05 80288/KIEWIT
ODOT Asphalt - CENTRAL Market
CONTRACT: 0008CTUS19055
BID = $1,204,774
EST = $1,137,500
20
200K
10
WTD. % OF
BIDTOTAL
0
MAINT
-10
Line Items
Copyright © 2003
2
0
1
E
1
1
vendor
2
0
3
E
1
2
2
0
3
E
2
0
2
0
3
E
5
0
3
0
1
E
4
6
6
1
4
E
1
1
a
a
00 **ESTIMATE**
02 SHELLY & SAND
6
1
4
E
1
2
-105K
6
1
4
E
1
5
6
1
4
E
1
8
6
1
5
E
1
0
6
1
5
E
2
0
01 OLDCASTLE/SHE
6
2
4
E
1
0
8
3
0
E
2
6
ODOT Asphalt - CENTRAL Market
CONTRACT: 0009CMAR20849
WTD. % OF
BIDTOTAL
Line Items
Copyright © 2003
10
9
8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
251E01
vendor
BID = $401,200
EST = $370,000
36 K
30 K
23 K
-30 K
254E01
PLANING
407E10
00 **ESTIMATE**
02 S E JOHNSON
448E47
ASPHALT
604E34
614E11
MAINT
01 SHELLY & SAND
03 OLDCASTLE/SHE
624E10
Tactical Strategies
•
•
•
•
•
Know Your Contractors
Improve Your Estimates
Punish Unbalanced Bidding
Facilitate Long-Range Bidding
Fight Monopolization
Copyright © 2003
Facilitate Long-Range Bidding
•
•
•
•
Facilitate portable plant mobility
Consider state ownership of pits
Combine smaller jobs in remote areas
Schedule and publicize large jobs well in
advance
• Enable electronic bidding
• Make appearance on planholder list
optional
Copyright © 2003
Purity Disrupts the Conspiracy
Lowfat Chocolate
District = Muhlenberg
0.18
I
0.17
Price per Hal f Pint ($'s)
U
U
H
0.16
H
O
H
U
O
H
U
H
U
I
P
H
0.15
I
H
O
U
H
0.14
H
P
O
U
H
PI
U
U
P
P
H
H
0.13
0.12
O
H
U
0.11
1979
1980
1981
1982
1983
1984
1985
Year
1986
1987
1988
1989
1990
1991
Unit Price vs. Bid Quantity
Interloper-Affected Bids
125
L
Price Per Cubic Yards
100
L
Modeled Concrete Price
L
W
L
L
L
75
W
LL
L
W
L
LW
LL
L
50
L
L
W
L
L
L
W
L
L
L
L
L
W
L
L
L
L
L
L
L
L
W
L
L
L W
L
L
L
L
W
L
L
L
L
L
W
Interloper Bids
25
0
50,000
100,000
Cubic Yards Concrete Let
150,000
Tactical Strategies
•
•
•
•
•
Know Your Contractors
Improve Your Estimates
Punish Unbalanced Bidding
Facilitate Long-Range Bidding
Fight Monopolization
Copyright © 2003
Fight Monopolization
• Large corporate mergers are the greatest
current threat to competition
• Establish communication with law
enforcement authorities (DOJ, AG, IG)
• Compare level of competition across
markets
• Beware of Oldcastle
Copyright © 2003
Ohio Department of Transportation
AVERAGE NUMBER OF BIDS ON ASPHALT CONTRACTS
CINCINNATI Market
7.0
6.0
5.0
4.0
3.0
2.0
1.0
1997
Copyright © 2003
1998
1999
Average Number of Bids
2000
2001
Without SE Johnson
2002
Mergers
Merger guidelines U.S. Department of Justice
Post-Merger HHI Above 1800. ... Mergers producing an increase in
the HHI of more than 50 points in highly concentrated markets postmerger potentially raise significant competitive concerns.... Where
the post-merger HHI exceeds 1800, it will be presumed that mergers
producing an increase in the HHI of more than 100 points are likely
to create or enhance market power or facilitate its exercise.
Section 1.51(c)
Copyright © 2003
ODOT Mergers Information
CINCINNATI Market
Before and After
HHI = 2638
HHI = 3025 Gain = 387
KOKOSING
All Other
6%
KOKOSING
Other
5%
S E JOHNSON
10%
16%
43%
BARRETT
43%
JOHN R JURGENSEN
JOHN R JURGENSEN
16% BARRETT
29%
OLDCASTLE
OLDCASTLE/SE JOHNSON
19%
Copyright © 2003
ODOT Mergers Information
TOLEDO Market
Before and After
HHI = 2518
OTHER
HHI = 3911 Gain = 1393
Kokosing: 1%
Erie: 2%
KOKOSING
ERIE BLACKTOP
HANCOCK ASPHALT
Other: 5%
Hancock: 4%
5%
OLDCASTLE
8%
Oldcastle/SE Johnson:
34%
41%
MILLER BROS
GERKEN
13%
Gerken/Miller: 47%
S E JOHNSON
33%
Copyright © 2003
Tactical Strategies
•
•
•
•
•
Know Your Contractors
Improve Your Estimates
Punish Unbalanced Bidding
Facilitate Long-Range Bidding
Fight Monopolization
Copyright © 2003