Like other bloggers, I was intrigued by the Basic IDIQ award by city council last week. For many years I, and others have alleged that bidding on city contracts is driven by special interests and in some instances the award of contracts seems like they are part of a corrupt process. What caught our attention was the significant difference in cost to the taxpayers’ between the Basic IDIQ and the second place bidder. It seemed like Basic IDIQ came in from out of town to challenge the local established contractors, however yesterday I shared with you how they have successfully bid on projects since at least 2007.
The price difference is definitely of interest as superficially it feeds the notion that local contractors collude and share bids in order to stay in business. Allegedly, the bid scam works on the idea that the general contractors agree to share government contracts and each bases their bid on the amount the others all agreed on ensuring that whoever is next in line gets the award. Because each contractor needs sufficient business to weather the length of time between awards, the prices artificially increases overtime.
A system like this depends on all collaborating to ensure everyone gets a piece of the pie. However, if an outsider comes in and submits a bid lower than the rest it creates a problem for the conspirators because they all lose their place at the public trough. If the alleged corrupt system were in place it is much harder for a local company to upset the scam because the conspirators would ban together to ensure the outsider would have a difficult time securing labor, materials and other local business services to complete the project and stay in business. Through pressure, eventually the interloper would submit or be driven out of business.
Without getting into the complexity of the bidding processes, especially construction projects, it is important to note that government entities use subjective items on their bids to score bidders and not always are the lowest bidders awarded contracts because of technical deficiencies on their bids that sometimes include items such as healthcare benefits or large-government experience.
An entity not dependent on El Paso business resources would be much more difficult to force into submission, especially a well-funded one.
If a fraud like the one I’ve described existed it would be difficult to prosecute because conspiracies, by their nature, take steps to insulate themselves from prosecution. That doesn’t mean there haven’t been successful prosecutions in the past it just means they are difficult to prosecute.
In this case, two items caught my attention; the fact that Basic IDIQ is an outside firm apparently making a statement in the El Paso market and the significant difference in prices quoted between them and the rest of the local contractors.
To be very clear, there are four significant reasons why the price difference is too diverse; the first is that Basic IDIQ purposely under bid the others for the opportunity to establish bonafides at the city for future contracts. Much like a “loss-leader” retail establishments use to lure customers into their stores. This would allow them the opportunity to bid future projects with the “successfully completed previous government” tag needed for other awards. They may have strategically bid for future work. However, keep in mind that they already have bonafides at the city and the county however, they may be looking for larger government jobs elsewhere.
Alternatively, it is possible that they mistakenly underbid because of the lack of general experience or a lack of an understanding of the El Paso market place. If that is the case then it is likely there will be an attempt to ensure the successful completion of the project through change orders, or the company would default on the work or be significantly harmed by this business venture that they would be unlikely to be bidding on future work.
It is also possible that they bid the work at a fair price and they will complete the project as required. If that is the case then the significance in the price difference shows the possibility of incompetence by the local contractors in completing projects or the complacency of knowing they would be awarded a contract by an incompetent government entity regardless of the cost to the taxpayer.
In this scenario the winners are Basic IDIQ and the taxpayers of the community. What a concept!
On the other hand, their bid could be the initial step in the possibility of exposing another corrupt process in El Paso.
Keep in mind that during Antonio “Tony” Dill’s sentencing on January 8, 2014 it was revealed that Dill gave federal investigators information on an unnamed organization that was formed to bribe officials in exchange for government contracts. The organization is allegedly composed of construction company owners. According to media reports, the federal government is investigating. Willie Gandara Sr., is also reportedly cooperating with federal investigators on this investigation.
At this point, it is difficult to know whether this bid is related to any construction companies involved in this ongoing inquiry.
How change orders are awarded for this contract as the project progresses would give us an opportunity to delve deeper into the various scenarios I have outlined.
At this point, we have lots of conjecture and very little facts on which to make a determination. However, it is important that we keep a close eye on this contract because it could be the thread that unravels yet another corruption scandal in El Paso. I will, and I’m sure others will keep a close look at the change orders related to the San Jacinto Park project to see if anything develops from it.