Case Sheds Light on Bidding Procedure : Contracts: A firm’s challenge of the county process may have saved taxpayers $4 million by forcing a competitor to lower its price.

Almost from the start, a local engineering firm believed Orange County officials had given it a dirty deal.

After having produced the lowest bid in a high-stakes battle over a $25-million county landfill contract, representatives of Lumsdaine Construction Inc. felt powerless as they watched county staffers throw out their bid, change the rules and eventually choose the contractor that has held the job for the last eight years.

Lumsdaine accused the county of favoritism and won a court order last week to help determine how the contract negotiations were conducted.

Although Lumsdaine ultimately did not get the contract, the company’s challenge of the process might have saved Orange County taxpayers $4 million by making E. L. Nobles Equipment Construction Inc. and Robert E. Fulton Co. Inc. of Brea bring down their price to keep the contract.

“We were sort of forced to,” Robert E. Fulton conceded during a recent interview.

By taking the case to court, Lumsdaine also put a spotlight on the county’s contracting procedures. Instead of adhering to a public competitive bid process with strict guidelines, the losing bidders have claimed, the county bent the rules to keep the contract in the hands of Nobles and Fulton.

At issue was a lucrative, 5-year deal to rent bulldozers and other heavy equipment for county operations at the Bee Canyon and Santiago Canyon landfills. Nobles and Fulton have held the contract since 1983 as a joint venture.

Although their last contract ended two years ago, numerous contract extensions resulted in higher costs to county landfill operations and raised landfill entrance fees that were passed on to trash-hauling companies and to consumers, according to opponents of Nobles and Fulton.

“The very fact that Nobles-Fulton has kept this landfill maintenance contract for several years beyond its original contract terms and received uncontested approvals for price increases, reflects the danger inherent in a closed-door system of contract award,” said Mark Doyle, an attorney for Lumsdaine.

After receiving the county’s business in 1983, Nobles and Fulton initially submitted the only proposal in 1986 when the county requested new contract bids. But the county reopened the process to give C. W. Poss Inc. an opportunity to compete, Fulton said.

By a narrow margin, Poss submitted the lowest bid. Yet Nobles-Fulton won a new 3-year contract worth $2.7 million each year.

In response to a complaint about the Board of Supervisors’ 1986 decision to award the job to Nobles and Fulton, Supervisor Thomas F. Riley defended the contract, saying the bids were so close, the deciding factor was the current contractor’s experience with landfill operations.

Without seeking competitive bids, the supervisors continued renewing the agreement past the 1989 expiration date and approved fee increases, so that between July 1, 1989, and June 30, 1990, the contract escalated to $6.4 million, according to documents in the county purchasing office.

Because the county was in the process of seeking a new contract, the Board of Supervisors approved another extension last November that is scheduled to expire at the end of April.

When the county reopened the contract for competitive bidding last April, Lumsdaine barely edged out Nobles and Fulton. But, according to its lawsuit, Lumsdaine’s contract talks with county officials ended abruptly when the county’s Integrated Waste Management Department decided to throw out all the bids.

After years of handling this contract through the competitive bidding process, staffers switched to a more subjective and less restrictive “request for proposals” process that does not require public disclosure of the new bids.

Cathy Potter, County Purchasing Services chief, said that in general the county uses the “request for proposals” process “when we want something done and the vendors are going to tell us how to do it.”

She said competitive bids are sought when the county specifies the type of equipment and services required, and the bids are always opened publicly when the value is over $100,000.

A staff memo to county supervisors last summer stated, among other things, that the original bids were rejected to avoid threatened lawsuits and because the prices were very close to each other. The memo did not explain why they changed the bidding procedure.

Fulton dismissed allegations of favoritism and said the previous fee increases were based on cost of living increases.

“I don’t think there’s any favoritism except on the ground from all the guys that work for the county and get down and dirty working with the trash,” Fulton said.

County officials refused to comment because the issue had gone to court, but Supervisor Gaddi H. Vasquez, who recommended in February that the contract be returned to Nobles and Fulton, defended the county’s business practices as being within “the discretion of any governmental entity.”

The board also refused Lumsdaine’s request to see the competing proposals before the contract was finalized, but the firm’s attorney recently argued successfully in court that the county did not have the right to keep the records secret.

After receiving court approval to see the top two bids, Lumsdaine discovered it had placed second in the bidding, not third as in the ranking presented by the county staff to the supervisors.

The difference is important, Doyle said, because if Nobles and Fulton does not carry out the contract, the job would fall to the chosen alternate, Stadia Group Inc., which bid $3.4 million more than Lumsdaine.

But Nobles and Fulton came out on top the second time around.

After seeing the initial bids last year, Fulton said recently that he drastically underbid the contract in order to keep the county’s business.

“We cut the price to the point that I doubt he (Lumsdaine) is close,” Fulton said before the proposals were revealed last week. “It’s basically cheaper than what we had (the first time) because the times are not good in the construction industry.”

The difference between what the county expected to spend over the next five years and what Nobles and Fulton offered in the second round of bidding was $4 million.

With final contract approval scheduled by the supervisors scheduled for early next month, Doyle said Lumsdaine will drop its legal challenge of the selection process. Doyle added that he hoped the board “would do the right thing” and require that all public contracts over a certain level, perhaps $100,000, be put out for open competitive bids.