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

TEA 2003 PresentationBurlington, VT

September 5, 2003

Anti-Collusion Tactics:How to Wage the War

Jim McClave & Wick HeathInfo Tech, Inc.

Copyright © 2003

• Know Your Contractors

• Improve Your Estimates

• Punish Unbalanced Bidding

• Facilitate Long-Range Bidding

• Fight Monopolization

Tactical Strategies

Copyright © 2003

• 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

• Determine all related Affiliate Contractors & Material Suppliers– Data Sources: Prequals & Sec’y 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

Company Officer Name Position Vendor

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 Co Pres

Beachwood Excav Co sec/tres

Beachwood Excav Co VP

Ironwood Paving Co Pres

Ironwood Paving Co sec/tres

Ironwood Paving Co VP

06085

06741

06849

Contractor Name Address POBox ZIP Tel #HOOKER CREEK ASPHALT & PAVING, LLC 3225 N.W. SHEVLIN PARK ROAD 57701 541-322-5700COATS CONSTRUCTION, L.L.C. 63101 NELS ANDERSON ROAD 1008 57709 541-389-0981DESCHUTES READY-MIX SAND & GRAVEL CO ABN OF ROBERT 2975 SKYLINE RANCH ROAD (97701) 1008 57709 541-382-5368R.L. COATS 2975 SKYLINE RANCH RD. (97701) 1008 57709 541-382-5368HOOKER CREEK ASPHALT & PAVING 63101 NELS ANDERSON RD 57701 541-322-5700

What are the Affiliate Relationships?

• Determine the Contractor’s 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 Contractor’s subs?

• Is the Contractor both Prime & Sub?– To whom does the contractor sub?

What does the Contractor do?

Copyright © 2003

• Determine where the Contractor Operates– Data Sources: Prequals, BAMS/DSS & Internet– Where are the contractor’s facilities located?– Does the contractor have & utilize portable

facilities?– How does contractor’s bid market compare to

its work market?

• Does the Contractor “respect” others’ markets?

Where does the Contractor do work?

Copyright © 2003

ACTIVITY OF: JOHN R. JURGENSENAsphalt

Copyright © 2003

WIN LOSS BID & SUB SUB ONLY FACILITY

ACTIVITY OF: SCHLOSS PAVINGAsphalt

Copyright © 2003


ACTIVITY OF: OLDCASTLE / SHELLYAsphalt

Copyright © 2003


• Track the Contractor’s 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

Copyright © 2002

Capacity Analysis

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

KOKO

SING

S E J

OHNSO

N

SHELLY C

O

SHELLY &

SANDS

COM

PLETE G

ENERAL

GREAT L

AKES

RUHLIN

JURG

ENSEN

SMIT

H & J

OHNSO

N

C J M

AHAN

ANTHONY A

LLEG

A

KENMO

RE

BEAVER

BECDIR

MIL

LER B

ROS

E S W

AGNER

$$/M

on

th

Avg Backlog Backog Jul '03 Avg Backlog Jul - Dec 03 Avg 2004

• Develop a knowledge of the contractor’s 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 contractor’s bidding behavior

consistent across markets?

How does the Contractor bid?

Copyright © 2003

VENDOR COMPETITION MATRIX

Apha Asp Delta Asp Bravo Asp Charlie A

Alpha Asp 301 .768 214 .711 195 .648 164 .545 97 .322 59 .276 56 .287 51 .311

Delta Asp 214 .775 276 .704 165 .598 147 .533 68 .318 112 .406 47 .285 56 .381

Bravo Asp 195 .871 165 .737 224 .571 126 .563 58 .297 51 .309 68 .304 35 .278

Charlie Asp 164 .759 147 .681 126 .583 216 .551 39 .238 33 .224 33 .262 49 .227

VENDORS OTHERS TOTALNo. of Wins 327 65 392






Tactical Strategies

Copyright © 2003

• 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

• 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

Ohio Department of Transportation

Copyright © 2003

Market CENTRAL CINCY CLEVELND COLUMBUSSE SOUTH TOLEDO

Pric

e ($

's)

50

60

70

80

90

100

Quantity (Cubic Yards)

0 5,000 10,000 15,000 20,000 25,000

Estimates, Index and Actuals

$23.00

$24.00

$25.00

$26.00

$27.00

$28.00

$29.00

$30.00

$31.00

$32.00

$33.00

98 99 00 01 02

$ / T

on

Estimate US Index Actual Perf


Copyright © 2003Price Asphaltic (bituminous) concrete

Construction sand and gravel NCCrude Petroleum (PCU1312#1)Ohio Weighted Average Price

Pric

e($'

s)

30

40

50

60

70

80

90

Year

1997 1998 1999 2000 2001 2002

Oregon Statewide Asphalt Prices

Copyright © 2003Price Asphaltic (bituminous) concrete

Oregon Weighted Average Price

Pric

e($'

s)

20

25

30

35

40

45

50

Year1996 1997 1998 1999 2000 2001 2002

Mil MG: 1.6 1.5 1.8 2.4 0.9 1.4 2.5

• 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– Can’t compare prices across markets or time– Provides contractors with another “degree of

freedom”

Fight Item Proliferation

Copyright © 2003

0%

10%

20%

30%

40%

50%

1

2-5 6-30 31-100 > 100

Number of times item used

ITEM PROLIFERATION

• 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

Line Item Profile – % Over Low BidWinning Bid: $2,586,355 Estimate: $2,223,859

St. Louis New ConstructionCONTRACT=920731-04 BID=$2,586,355 EST=$2,233,859 PANEL=1 OF 1

VENDOR 00 **ESTIMATE** 01 WEBER INC., F 02 9910109/BANGE

% OF BIDTOTAL

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

Generated Item Number

20220102031000203600030120003040343502121061320006161005616102061810009029400

-$77,600

$155,200

MobilExcavRem

TempTrafSig

00 **ESTIMATE** 01 WEST 02 BROTHERSVENDOR


VENDOR 00 **ESTIMATE** 01 9910109/BANGE 02 WEBER INC., F

% OF BIDTOTAL

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

11


202201020310002032000203600020630003012000502110950212106091060618100070320108061016

Excavation -$243,200

$486,400


00 **ESTIMATE** 01 BROTHERS 02 WESTVENDOR

Mobil


VENDOR 00 **ESTIMATE** 01 9910109/BANGE 02 9910236/MISSO

% OF BIDTOTAL

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9


2021052 2022010 2024010 2031000 2061000 4031026 4037110 4037200 4038992 4038993

Asph AggRem Imp Rem Asp -$566,600

$1,133,200


Panel 1 of 2

00 **ESTIMATE** 01 BROTHERS 02 PAVEMENTVENDOR


VENDOR 00 **ESTIMATE** 01 BERRA CONSTRU 02 KOLB GRADING03 WEBER INC., F 04 FREESEN INC. 05 VERNACI CONST

% OF BIDTOTAL

-10

0

10

20

30

40


2035000 2036000 2063000 6181000 7261442 7261472 7261484 9999999

Line Item Profile – % Over Low Bid Winning Bid: $3,854,000 Estimate: $5,938,862

MobilExcav

$770,800

$1,541,600

00 **ESTIMATE** 01 INTRUDE 02 SPENCERSVENDOR

03 WEST 04 MCTAVISH 05 GRADING

• 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






Tactical Strategies

Copyright © 2003

• Use collapsed items – combine materials and labor

• Run and analyze LIP’s immediately after bid-openings

• Establish a proactive Bid Review & Awards Committee

• Reject materially unbalanced bids

Punish Unbalanced Bidding

Copyright © 2003

CONTRACT=12061 BID=$1,817,940 EST=$2,147,593

vendor 00 **ESTIMATE** 01 KLAMATH PACIF02 80251/ROY L. 03 J.C. COMPTON04 LTM INCORPORA 05 80288/KIEWIT

E E E 1 1 12 2 2 3 3 34 4 4 5 5 5

% OF BIDTOTAL

-20

-10

0

10

20

30


0210.0

0225.0

0225.3

0225.7

0641.0

0745.0

0745.0aa

0745.0ab

0745.0ac

0759.0

E

E E E E

E

E

E

E

E1 1 1 1 1 1 1 1 1 1

2

2 2 2 22 2

2 22

3

3 33

3

3

3

3

3

3

4

4 4 44

4

4

4

4

4

5

5 5 55

55

5

5

5

Copyright © 2003

Oregon Department of TransportationLine Item Profiles

ODOT Asphalt - CENTRAL Market

Copyright © 2003

WTD. % OF BIDTOTAL

CONTRACT: 0008CTUS19055 BID = $1,204,774 EST = $1,137,500

vendor 00 **ESTIMATE** 01 OLDCASTLE/SHE02 SHELLY & SAND

-10

0

10

20

201E11

203E12

203E20

203E50

301E46

614E11aa

614E12

614E15

614E18

615E10

615E20

624E10

830E26

MAINT

200K

-105K

Line Items

ODOT Asphalt - CENTRAL Market

Copyright © 2003

WTD. % OF BIDTOTAL

CONTRACT: 0009CMAR20849 BID = $401,200 EST = $370,000

vendor 00 **ESTIMATE** 01 SHELLY & SAND02 S E JOHNSON 03 OLDCASTLE/SHE

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

251E01 254E01 407E10 448E47 604E34 614E11 624E10Line Items

23 K

36 K

30 K

PLANING ASPHALT MAINT

-30 K






Tactical Strategies

Copyright © 2003

• 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

Purity Disrupts the ConspiracyLowfat Chocolate

District = MuhlenbergP

rice

per

Ha

lf P

int

($'s

)

0.11

0.12

0.13

0.14

0.15

0.16

0.17

0.18

Year1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

HOU

OUH

OUH

H H

H UH

U

HOUHO

PU

I

H

P

IP

UH

I

UH

P

I

UP

H

Pric

e P

er C

ubic

Yar

ds

25

50

75

100

125

Cubic Yards Concrete Let0 50,000 100,000 150,000

L

L

L

L

LL

LLL

L

LL

LLLL

LLLLLLL

LL

LLL

LL

L

LL

L

LL

LLLLLLL

LLL

L

LLL

L

L

LLLL

W

WW

WW

W

W

W

W

W

W

Modeled Concrete Price

Unit Price vs. Bid Quantity Interloper-Affected Bids

Interloper Bids






Tactical Strategies

Copyright © 2003

• 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


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

1997 1998 1999 2000 2001 2002

Average Number of Bids Without SE Johnson

Copyright © 2003

Merger guidelines U.S. Department of Justice

Post-Merger HHI Above 1800. ... Mergers producing an increase inthe HHI of more than 50 points in highly concentrated markets post-merger potentially raise significant competitive concerns.... Wherethe post-merger HHI exceeds 1800, it will be presumed that mergersproducing an increase in the HHI of more than 100 points are likelyto create or enhance market power or facilitate its exercise.

Section 1.51(c)

Mergers

Before and After

Copyright © 2003

ODOT Mergers InformationCINCINNATI Market

HHI = 2638

6%

JOHN R JURGENSEN

S E JOHNSON

KOKOSING

43%

19%

16%

10%

All Other

5%

OLDCASTLE

BARRETTJOHN R JURGENSEN

OLDCASTLE/SE JOHNSON

BARRETT

KOKOSING Other

43%

29%

16%

HHI = 3025 Gain = 387

Before and After

Copyright © 2003

ODOT Mergers InformationTOLEDO 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%






Tactical Strategies

Copyright © 2003

Documents

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