Maximize Your Federal Funds with Additive Alternate BiddingApril 3, 2013
Have you worried about not being able to award a project due to bids coming in too high? Or have Federal funds on your project been deobligated because bids came in low and could no longer be accounted for?
One approach in proactively addressing these issues is to implement a procurement method that maximizes and enhances the work within a defined budget: Additive Alternate Bidding.
Section 12.11 of the Local Assistance Procedures Manual provides some guidance on this optional contracting method, but I’ve put together some points to help those who are unfamiliar with the procurement technique that is becoming more commonly used by local agencies.
What is Additive Alternate Bidding?
Additive alternates is a bidding technique that specifies a base bid of items and additional work that may be selected if proposals are within the project budget.
Under this process, the base bid of items includes items of work that fulfills the basic purpose and need for the project. The alternates are comprised of independent packages of work that supplement the base bid1.
When Can Additive Alternate Bidding Used?
This procurement method may be useful under the following circumstances:
- To maximize the scope for projects within limited or tight budgets.
- If there is some uncertainty regarding the cost of the project and features can be incrementally scoped to maximize use of available funds.
- If the project scope can be tailored to include add-ons in priority of importance.
- To obtain the best options for the available funds where substitutions are specified that improve quality or performance within the defined budget.
How to Implement Additive Alternate Bidding
To ensure a fair and competitive process, it’s critical to clearly communicate the engineer’s estimate (base bid and alternates) and method in which proposals will be evaluated for award2.
The items and quantities of work in the engineer’s estimate should also be clearly distinguished with the base bid and alternate(s) segments. Each segment should be able to stand-alone if they were to be delivered separately. For example, general items of work such a traffic control, mobilization, etc. should be included in each segment.
To ensure that the award will be based on the lowest responsive bid considering the base bid and those additive alternates which are within budget3, it’s important that the priority order in which the alternates will be evaluated for award be specified in the special provisions.
A helpful resource I recommend reviewing is Chapter 4 (Section 3) of the Caltrans Alternative Procurement Guide. Although it’s not a Division of Local Assistance reference, it provides other procurement considerations that should be in place to avoid subjectivity in the evaluation of bids. It also includes sample special provisions that can be used as templates for your project.
The fluctuating bidding environment can make utilizing project funds difficult at times, but hopefully you see additive alternate bidding as a tool in addressing that. If implemented properly, a local agency can ensure a competitive bid process and maximize scope of work on projects.
Have you used this alternative contracting method for your projects? Do you have any thoughts or tips that you can share with other subscribers? Contribute to the discussion by commenting below.
Revised 4/17/13: Added footnote #2 to share advice from Mike Giuliano, Caltrans Central Region Construction Oversight Engineer. Mike shared a great tip to help avoid potential bid protests arising from unclear DBE instructions.
The scope and limits of work identified in the base bid and alternates should be cleared in your NEPA approval. ↩
Expectations for bidder DBE documentation should also be made clear. In order to ensure an “apples to apples” evaluation of bidders’ DBE Commitment and Goal attainment, the “Total Contract Amount” used for completing their Exhibit 15-G submittal should be specified. The special provisions should be clear so that a bidder understands whether the DBE Commitment should be submitted based on their “Base Bid Only” or “Base Bid Plus All Additive Alternates” proposed amount. ↩
FHWA Contract Administration Core Curriculum Participant’s Manual and Reference Guide: Section IV includes a section that further discusses additive alternate bidding. ↩