Contracts caught in bid preference debate

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Sean Ryan
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Milwaukee is bidding out three contracts that would grant a 5 percent cushion to city-based builders even as two contractors are asking a judge to prohibit the local preference.

A Milwaukee County judge on Nov. 3 will consider whether to prevent the contract preference until a lawsuit challenging the city law is settled. But the three sewer contracts out for bid have due dates at the end of the month, meaning the city has to decide if it will stick to the preference or shelve the law until the judge rules.

The city, as of Monday morning, had not yet made that decision, said Ghassan Korban, coordination manager for the Milwaukee Department of Public Works.

“We are assessing whether to pursue holding off or not,” he said of awarding the three contracts.

One of those contracts includes sewer work Milwaukee-based MJ Construction Inc. commonly performs and could result in the builder taking advantage of the city’s 5 percent bid preference. It was that type of circumstance last month that prompted Underground Pipeline Construction Inc., New Berlin, and American Sewer Services Inc., Rubicon, to file a lawsuit challenging the city’s decision to award two contracts to MJ Construction even though it was not the low bidder.

The two contractors argue the city cannot use the preference on contracts that receive grants or loans from the state’s Clean Water Fund.

Representatives from MJ Construction were unavailable for comment.

If history repeats itself on any of the contracts out for bids, it could be incorporated into the lawsuit, said Charles Palmer, attorney representing Underground Pipeline and American Sewer.

“The problem is that, as contractors, they are being forced to bid even lower if they want the job,” said Palmer, of Michael Best & Friedrich LLP’s Waukesha office. “So, in effect, they are being asked to lose money if they want to compete.”

Bidders are going to be less likely to go after Milwaukee projects if the lawsuit fails and the local preference stays in place, said Jeff Weakly, president of the Menomonee Falls-based Super Excavators Inc. The company is not hurt directly by the Milwaukee law because the preference only applies up to a $25,000 bid difference, which does not often come into play on the larger jobs Super Excavators bids on, he said.

“Anything there at $500,000 or less, it’s very significant,” Weakly said, “and I’m sure it’s going to discourage bidders over time. It may not have happened yet.”

Underground Pipeline will bid for the Milwaukee sewer projects as the company always has and will not be distracted by the local preference, said Mike Dretzka, project manager for Underground Pipeline.

“We’re going to keep bidding no matter what,” he said. “We have to try to get work.”

It is an unintended consequence if the lawsuit delays the award of the sewer contracts out for bid, Palmer said. Those contracts are the last the city will bid this year.

“The intent (of the lawsuit) isn’t to harm any contractor,” he said, “but just to have a level playing field.”