A Kasilof logging company says a competitor was handed an unfair advantage during a recent timber sale when the Kenai Peninsula Borough violated its own bidding rules.
Gates Construction Co. has appealed Borough Mayor Dale Bagley's decision to award the 1,026.8-acre Ninilchik-area timber contract to its competitor, Kenai-based ArcTech Services Inc. The Kenai Peninsula Borough Assembly will hear that appeal at a special meeting Wednesday at 2 p.m. in Soldotna.
According to Gates' complaint filed April 11, the borough improperly accepted a bid from ArcTech at the Borough Building on North Binkley Street in Soldotna. The bid documents required bids to be submitted at the Spruce Bark Beetle Mitigation Office on the Spur Highway by 2 p.m. on March 20.
According to Gates, ArcTech's bid was submitted late enough to have made it impossible to reach the beetle office by the 2 p.m. deadline. Thus, Gates argues that ArcTech was not a responsive bidder under the bidding rules.
Gates' Vice President Bernie Brown said a Gates' representative had been specifically instructed a few days earlier that no bids would be accepted at the Borough Building. Brown said that on March 15 Gates representative Fred Thompson had attempted to submit a bid for an earlier timber sale at the Borough Building and had been told all bids were to be submitted at the beetle mitigation office. Thompson took that bid to the beetle office, and did the same on March 18 with a bid on a subsequent timber sale.
On March 20, the borough held the Stariski Timber Sale, the sale now in appeal. Brown said Gates and ArcTech are competitors who provide timber to the same buyer. To better the chance that ArcTech would not be the successful bidder, Gates prepared two bids for the Stariski sale, Brown said. One offered a certain price per log ton and was to be submitted if ArcTech did not bid. A second, offering a higher log-ton price, was to be used if ArcTech did compete.
"Gates made the determination to prepare two bids ... because Gates was willing to reduce an otherwise reasonable return to keep the product from being delivered to Gates' buyer by ArcTech ...," Brown said in his notice of appeal April 11. "This is standard practice among loggers bidding on timber sales."
If ArcTech had not bid, a Gates loss would have been of less concern because the winner would not have delivered to Gates' market, Brown said.
On the day of the bid opening, Thompson arrived early at the beetle mitigation office and learned ArcTech had not submitted a bid. He waited until the bidding deadline and submitted the lower bid, Brown said.
ArcTech, meanwhile, had turned in its bid at the finance office in the Borough Building, where only days before, Gates had been told bids were not accepted. A finance office worker stamped ArcTech's bid and accepted it.
Brown said an ArcTech representative then drove to the beetle mitigation office, arriving after the 2 p.m. deadline, "opened the door and announced that their bid was at the borough office."
ArcTech's bid was higher than Gates' bid and was declared the tentative winner. Gates appealed to Mayor Dale Bagley in a March 21 letter.
"This is not an issue of improper public notice, conflicting documents or justifiable confusion," Brown wrote. "It is an issue of improper procedure on both the bidder and the borough's part. No other bidder on at least the prior nine sales was allowed to return their bid to the borough's main office."
Brown said one bidder couldn't be held to a different standard from the rest.
Bagley issued a decision in an April 2 letter to Gates declaring the borough's intent to award the contract to ArcTech. Bagley said the borough's purchasing manager, Tom Burgess, had reviewed the circumstances, relevant ordinances and interviewed staff involved in the sale.
He also said the beetle mitigation program staff had asked the purchasing division to accept and time-stamp any timber sale bids received at the Borough Building.
"The (mitigation program) staff's request was driven by recent changes in bid delivery destinations for these sales, and because of confusion during previous weeks' timber sales bid openings," Bagley said.
He acknowledged that, "ArcTech delivered its Stariski Timber Sales bid to the North Binkley facility in accordance with customary practices, but not in accordance with the bid instructions," but added that the ArcTech bid was accepted on time and was under the control of the purchasing department until the bid opening.
"Although the confusion is regrettable, it is appropriate to allow the bid from ArcTech Services Inc. to remain and be acceptable for award of the Stariski Timber Sales," Bagley said.
ArcTech had "a right to rely" on borough agents accepting its bid, and the "chain of custody" was unbroken, he said.
Gates appealed to the assembly, arguing that borough law requires bids to be submitted in the proper place and by the proper deadline or they will not be opened. Borough law allows a purchasing officer to waive certain irregularities, but specifically states "timeliness and manual signature requirements shall not be waived."
Brown said ArcTech's ability to submit its bid at the borough office gave ArcTech an unfair advantage. Brown is seeking to have the bid award to ArcTech tossed out and the timber sale awarded to Gates, the only other bidder.
Kathryn Thomas, president of ArcTech Services, said her company had offered a fair and competitive price for the timber, a price $100,000 more than Gates' lower bid. She said she doesn't think much of Gates officials parking at the beetle mitigation building to see who comes to bid.
"People should be aware that the purpose of a sealed, competitive bid process is for the logger to calculate and offer a fair price to the people of the borough for their resource. By staking out the beetle office and manipulating the bid, they (Gates) deprive the people of the borough of the value of their resource," she said.
Thomas said ArcTech has been in the construction business for more than 25 years, and at times in the timber industry, and has historically submitted bids for borough projects at the borough office. She said borough officials should now be aware of Gates' bidding practice.
She also suggested the borough should review other recent timber sale bids awarded to Gates.
Borough Attorney Colette Thompson declined to comment.
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