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TEA 2003 Presentation Burlington, VT September 5, 2003 Anti-Collusion Tactics: How to Wage the War Jim McClave & Wick Heath Info Tech, Inc. Copyright ©

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Presentation on theme: "TEA 2003 Presentation Burlington, VT September 5, 2003 Anti-Collusion Tactics: How to Wage the War Jim McClave & Wick Heath Info Tech, Inc. Copyright ©"— Presentation transcript:

1 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

2 Know Your Contractors Improve Your Estimates Punish Unbalanced Bidding Facilitate Long-Range Bidding Fight Monopolization Tactical Strategies Copyright © 2003

3 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? Know Your Contractors Copyright © 2003

4 Determine all related Affiliate Contractors & Material Suppliers –Data Sources: Prequals & Secy 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 Who is the Contractor? Copyright © 2003

5 CompanyOfficer NamePositionVendor ORGANIZATIONAL LINKS Slappy Jones Earnest Smith Snuffy Conroy E.W. Jones III E. Dalton Smith Larry D. Conroy, Jr Jones, E. Wilton E. D. Smith (Itchy) Conroy, Danny Norwood Bridge Co Pres Norwood Bridge Co sec/tres Norwood Bridge Co VP Beachwood Excav CoPres Beachwood Excav Cosec/tres Beachwood Excav CoVP Ironwood Paving Co Pres Ironwood Paving Co sec/tres Ironwood Paving Co VP 06085 06741 06849

6 What are the Affiliate Relationships?

7 Determine the Contractors 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 Contractors subs? Is the Contractor both Prime & Sub? –To whom does the contractor sub? What does the Contractor do? Copyright © 2003

8 Determine where the Contractor Operates –Data Sources: Prequals, BAMS/DSS & Internet –Where are the contractors facilities located? –Does the contractor have & utilize portable facilities? –How does contractors bid market compare to its work market? Does the Contractor respect others markets? Where does the Contractor do work? Copyright © 2003

9 ACTIVITY OF: JOHN R. JURGENSEN Asphalt Copyright © 2003

10 ACTIVITY OF: SCHLOSS PAVING Asphalt Copyright © 2003

11 ACTIVITY OF: OLDCASTLE / SHELLY Asphalt Copyright © 2003

12 Track the Contractors 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? When does the Contractor have Capacity? Copyright © 2003

13 Copyright © 2002

14 Develop a knowledge of the contractors 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 contractors bidding behavior consistent across markets? How does the Contractor bid? Copyright © 2003

15 VENDOR COMPETITION MATRIX Apha AspDelta AspBravo AspCharlie A Alpha Asp301.768214.711195.648164.545 97.322 59.276 56.287 51.311 Delta Asp214.775276.704165.598147.533 68.318112.406 47.285 56.381 Bravo Asp195.871165.737224.571126.563 58.297 51.309 68.304 35.278 CharlieAsp164.759147.681126.583216.551 39.238 33.224 33.262 49.227 VENDORS OTHERS TOTAL No. of Wins 327 65 392

16 Know Your Contractors Improve Your Estimates Punish Unbalanced Bidding Facilitate Long-Range Bidding Fight Monopolization Tactical Strategies Copyright © 2003

17 Study price trends Fight item proliferation Beware of chasing prices on bid-based estimates Use cost-based estimates at least on major items Improve Your Estimates Copyright © 2003

18 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 Study Price Trends Copyright © 2003

19 Ohio Department of Transportation Copyright © 2003

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21 Ohio Department of Transportation Copyright © 2003

22 Oregon Statewide Asphalt Prices Copyright © 2003

23 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 –Cant compare prices across markets or time –Provides contractors with another degree of freedom Fight Item Proliferation Copyright © 2003

24 0% 10% 20% 30% 40% 50% 1 2-56-3031-100> 100 Number of times item used ITEM PROLIFERATION

25 Track bid-based estimate trends Compare price estimates across markets – are differences justified by costs? Compare price estimate trends to national price trends Beware of Chasing Bid Prices Copyright © 2003

26 Line Item Profile – % Over Low Bid Winning Bid: $2,586,355 Estimate: $2,223,859 -$77,600 $155,200 Mobil Excav Rem Temp Traf Sig 00 **ESTIMATE**01 WEST02 BROTHERS VENDOR

27 Excavation -$243,200 $486,400 Line Item Profile – % Over Low Bid Winning Bid: $4,864,378 Estimate: $4,237,157 00 **ESTIMATE**01 BROTHERS02 WEST VENDOR Mobil

28 Asph Agg Rem Imp Rem Asp -$566,600 $1,133,200 Line Item Profile – % Over Low Bid Winning Bid: $14,165,733 Estimate: $11,310,108 Panel 1 of 2 00 **ESTIMATE**01 BROTHERS02 PAVEMENT VENDOR

29 Line Item Profile – % Over Low Bid Winning Bid: $3,854,000 Estimate: $5,938,862 Mobil Excav $770,800 $1,541,600 00 **ESTIMATE**01 INTRUDE02 SPENCERS VENDOR 03 WEST04 MCTAVISH05 GRADING

30 Provides sanity check on major items Establishes a benchmark for future bid- based estimates Market inquiries by DOT can have positive impact on prices Use Cost-Based Estimates Copyright © 2003

31 Know Your Contractors Improve Your Estimates Punish Unbalanced Bidding Facilitate Long-Range Bidding Fight Monopolization Tactical Strategies Copyright © 2003

32 Use collapsed items – combine materials and labor Run and analyze LIPs immediately after bid-openings Establish a proactive Bid Review & Awards Committee Reject materially unbalanced bids Punish Unbalanced Bidding Copyright © 2003

33 Oregon Department of Transportation Line Item Profiles

34 ODOT Asphalt - CENTRAL Market Copyright © 2003 WTD. % OF BIDTOTAL CONTRACT: 0008CTUS19055 BID = $1,204,774 EST = $1,137,500 vendor00 **ESTIMATE**01 OLDCASTLE/SHE 02 SHELLY & SAND -10 0 10 20 2 0 1 E 1 1 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 6 1 4 E 1 2 6 1 4 E 1 5 6 1 4 E 1 8 6 1 5 E 1 0 6 1 5 E 2 0 6 2 4 E 1 0 8 3 0 E 2 6 MAINT 200K -105K Line Items

35 ODOT Asphalt - CENTRAL Market Copyright © 2003 WTD. % OF BIDTOTAL CONTRACT: 0009CMAR20849 BID = $401,200 EST = $370,000 vendor00 **ESTIMATE**01 SHELLY & SAND 02 S E JOHNSON03 OLDCASTLE/SHE -8 -7 -6 -5 -4 -3 -2 0 1 2 3 4 5 6 7 8 9 10 251E01254E01407E10448E47604E34614E11624E10 Line Items 23 K 36 K 30 K PLANINGASPHALTMAINT -30 K

36 Know Your Contractors Improve Your Estimates Punish Unbalanced Bidding Facilitate Long-Range Bidding Fight Monopolization Tactical Strategies Copyright © 2003

37 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 Facilitate Long-Range Bidding Copyright © 2003

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39 Purity Disrupts the Conspiracy Lowfat Chocolate District = Muhlenberg P r i c e p e r H a l f P i n t ( $ ' s ) 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 Year 1979198019811982198319841985198619871988198919901991 HOU O U H O U H HH H U H U HO U HO P U I H P I P U H I U H P I U P H

40 Price Per Cubic Yards 25 50 75 100 125 Cubic Yards Concrete Let 050,000100,000150,000 L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L L W W W W W W W W W W W Modeled Concrete Price Unit Price vs. Bid Quantity Interloper-Affected Bids Interloper Bids

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42 Know Your Contractors Improve Your Estimates Punish Unbalanced Bidding Facilitate Long-Range Bidding Fight Monopolization Tactical Strategies Copyright © 2003

43 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 Fight Monopolization Copyright © 2003

44 Ohio Department of Transportation Copyright © 2003 AVERAGE NUMBER OF BIDS ON ASPHALT CONTRACTS CINCINNATI Market 1.0 2.0 3.0 4.0 5.0 6.0 7.0 199719981999200020012002 Average Number of BidsWithout SE Johnson

45 Copyright © 2003 Mergers

46 Before and After Copyright © 2003 ODOT Mergers Information CINCINNATI Market HHI = 2638 6% JOHN R JURGENSEN S E JOHNSON KOKOSING 43% 19% 16% 10% All Other 5% OLDCASTLE BARRETT JOHN R JURGENSEN OLDCASTLE/SE JOHNSON BARRETT KOKOSINGOther 43% 29% 16% HHI = 3025 Gain = 387

47 Before and After Copyright © 2003 ODOT Mergers Information TOLEDO Market HHI = 2518 GERKEN S E JOHNSON MILLER BROS OLDCASTLE HANCOCK ASPHALT ERIE BLACKTOP KOKOSING 34% 33% 13% 8% 5% OTHER HHI = 3911 Gain = 1393 Oldcastle/SE Johnson: 41% Gerken/Miller: 47% Hancock: 4% Erie: 2% Kokosing: 1%Other: 5%

48 Know Your Contractors Improve Your Estimates Punish Unbalanced Bidding Facilitate Long-Range Bidding Fight Monopolization Tactical Strategies Copyright © 2003


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