Caveat Emptor – Or, Let The Buyer Beware!

Key Points:

The Request for Proposals/Bid process is how well-run cities and businesses get the best possible price for what they need or want;
Santa Fe Public Works urged the City to shortcut the RFP/Bid process to contract with the unqualified contractor Dalkia for its LED streetlight upgrade;
Public Works Director Wheeler called the Dalkia contract a “huge benefit” to Santa Fe and urged the Governing Body to accept it.
Dalkia charged Santa Fe greater than 20% – and possibly greater than 60% – more than it is charging other cities – like Saco, Maine – who insisted on competing the work through the RFP/Bid process. That’s between $60 and $140 for each luminaire. And, in the case of Saco, that’s for nearly the same number of luminaires as Santa Fe.
Santa Fe’s Due Diligence failed to discover that the city was being substantially over-charged by Dalkia, even compared to what Dalkia was offering other cities where it had to bid for the same work.
Santa Fe needs to revisit its contract with Dalkia and use the RFP/Bid process to get the best possible street lighting designer, installer, operator, and maintenance for the best possible price!

Santa Fe: What Happens When The Buyer Doesn’t Beware

Responsible Procurement in a Nutshell

When a well-run business or city wants to buy goods or services they ordinarily go through what’s called the RFP/Bid process, whose purpose is to make sure the business, or city, gets the best possible price for their wants or needs.

Here’s how the RFP/Bid process works:

Write a Request for Proposals (RFP): Specify what you want or need in writing and in detail. Don’t miss anything. Do this in enough detail so that if a contractor comes back with a proposal that fits your written request, you’d be happy to take it.
Decide on how you will evaluate proposals that come back to you. This should be part of the RFP: you want contractors to know what your priorities are so that they can give you the best possible bid for your work!
Ask for proposals (bids): Advertise your RFP and let any contractor that thinks they can satisfy it make a proposal at their best price. Set a date – e.g., 3 weeks, a month – when bids are due.
Evaluate the bids: Once the bid due date has passed, open the bids and evaluate them by the criteria you previously settled on.
If you’ve gotten good bids, choose the best one.

If you’ve done it right you’ll find that contractors – who, after all, want your business! – will have given you the best possible price they can for the goods or services that satisfy your clearly stated wants and needs.

A procurement shortcut

Ordinarily, cities in New Mexico are required to use the RFP/Bid process for just about any significant purchase. That’s a good thing: it protects the interests of the city and its taxpayers.

State law provides an exception to the use of the RFP/Bid process. Suppose that another city has already carried out the process for exactly the same thing you want, identified an appropriate contractor, and executed a contract with them. If that’s the case, and you are saving money, you can “make use of existing contract” and purchase from that contractor as long as it’s the same thing and at the same price.

Procurement using an existing contract is a shortcut. It’s provided to avoid duplicating the work of an RFP/Bid process when you want exactly the same thing from the same vendor as another city. Cities don’t have to use it. Its use is strictly limited by state law. It’s a potentially useful shortcut when you’re dealing with procuring something simple, tangible, and where you are confident that the market hasn’t changed much since the original contract was executed. After all, if the market has changed significantly, then what was the right choice several years ago may not be the right choice now.

Shortcuts are risky, especially for complex projects! In all events, when you are going to shortcut the RFP/Bid process in this way, exceptionally robust Due Diligence by responsible city administrators is crucial to protect the interests of the city and its residents.

Santa Fe Street Lighting Procurement

Surprisingly, the Santa Fe City Department of Public Works is trying to use a five year old contract made between Albuquerque and Citelum, a company that specializes in street lighting, to shortcut the procurement process to award a contract to entirely different company – Dalkia – today.

Why is this surprising?

Dalkia is not Citelum. Procurement under existing contract is not allowed except with the original company: in this case, Citelum.
Street lighting is complicated. The requirements for Santa Fe’s street lighting project are very different from those for Albuquerque’s job.
The Albuquerque-Citelum contract is old. Five years is a long time. Markets change. Prices drop. Newer products, that better suit a city’s needs, become available at better prices. This is particularly true for LED street lighting.

But, let’s set all these things – the legality of the procurement, the fact that Albuquerque’s project requirements are different than Santa Fe’s, and the age of the contract – aside. Let’s focus just on whether Santa Fe is getting value for what money it is giving Dalkia under its contract.

A Tale of Two Cities

Saco, Maine: An example of the RFP/Bid Process at work

Meet Saco, Maine. In 2020 Saco decided it wanted to replace its aging streetlight infrastructure with newer LED streetlights. Saco went through the RFP/Bid process as described above.

What did Saco want? Pretty much the same thing Santa Fe wants:

An Investment Grade Audit of existing street lights;
An independent and certified street-by-street lighting design analysis consistent with Illuminating Engineering Society safety standards;
A cost savings analysis for the city now and into the future;

Work with Saco to effectively manage procurement requirements for the existing lighting network owned by Central Maine Power (just like Santa Fe and PNM);
Propose new LED light fixtures that are individually controllable (e.g., dimmable) and compliant with Dark Sky standards; and
Install, or oversee the installation, of the new LED luminaires and the recycling/disposal of all waste materials.

These are the highlights: Saco’s March 11, 2021 RFP goes into more detail about what each of these requirements means so that every bidder knew exactly what Saco wanted and could make their best proposal for the work.

What did Saco get for their efforts?

Saco opened the bids on April 21, 2021. Six different companies responded to Saco’s RFP with bids: Affinity LED, Dalkia Energy, NextEra Energy, Pine Ridge Technologies, RealTerm Energy, and Tanko Lighting. Saco had the opportunity to review, evaluate, and – ultimately – choose among all these different bids. Different streets require different lights: for the purpose of comparison with Santa Fe we’ll focus on residential streets requiring 28W LED street lights. Among the bids Saco received, different contractors recommended different luminaire products: Acuity, Affinity, Cooper Lighting Solutions, and General Electric. Across all solutions the cost for a fully installed 28W LED replacement streetlight ranged from a low of $209.50 to a high of $297.18.

In the end, Saco chose the RealTerm Energy bid. While RealTerm’s bid wasn’t the lowest cost, it was the bid that scored highest using the several different criteria that Saco identified for “grading” the different bids.

Three things of note:

The fully controllable, full installed, 28W residential LED streetlight luminaires average about $250 each; and
Three contractors recommended the Autobahn ATBX P40 MVOLT MP P7, at an average price of just under $250 each. This is the same article as is being proposed for Santa Fe residential streets.
Saco is just one example: you can find many other examples of cities that have, in the last 1-2 years, written RFPs to replace their city’s streetlights with modern LED lighting, gotten a similarly large number of bids, all quoting similar prices.

Santa Fe: An example of what can go wrong

Santa Fe also wants to upgrade its aging streetlight infrastructure, save energy, reduce costs, and – late in the process – prioritize Dark Sky standards. Unlike Saco, Santa Fe Public Works decided to shortcut the RFP/Bid process by adopting (and very possibly, misusing) a five-year-old contract between Albuquerque and Citelum to contract with another company, Dalkia. Santa Fe didn’t think hard about what it wanted, or prioritize its needs: it let Dalkia tell it what it wanted and needed.

What did Santa Fe get for its efforts?

On behalf of Mayor Webber, Councilor Lindell and Councilor Rivera, on February 24, 2021 Public Works Director Wheeler urged the Governing Body sign a contract with Dalkia.

At the February 24 Governing Body meeting, Councilor Garcia asked Director Wheeler why the city was not using the RFP/Bid process for this exceptionally large contract. Director described the “huge benefit” to the city of working with Dalkia (who, as we have already seen, has never done a city street light project before) as a reason to not even consider writing an RFP and asking contractors to bid on the job.

In the contract sponsored by Mayor Webber and advocated so strongly by Director Wheeler, Santa Fe would pay $342.26 for each residential street 28W luminaire, fully installed.

This is exactly the same luminaire that Saco was offered by the same company – Dalkia – for $209.50, fully-installed.

Actually, not quite the same: Saco stated at the outset that it wanted lighting that met Dark Sky standards. Santa Fe didn’t. When Santa Fe decided, late in the game, that it wanted Dark Sky compliant luminaires, Dalkia said it could do that for an additional cost. We don’t yet know what that additional cost would be.

In other words, Dalkia’s “deal” for Santa Fe was 63% more costly than for Saco, and will – we are told – be even more costly when the cost of Dark Sky compliance is figured in.

[There is some ambiguity in the Dalkia proposal to Saco as to whether a dimming capability was included; however, even if that capability is an add-on, Santa Fe is still being charged about 20% more than Saco. And, while dimming capability is present in the Santa Fe fixtures, at the May 26 Governing Body meeting the proposal urged by Director Wheeler and approved by the Governing Body excluded the use of dimming in the lighting design, leaving it for a later contract amendment, which would presumably come at an additional cost.]

Saco is just one example of many where a city’s use of the RFP/Bid process has led to a less expensive and more complete solution than Santa Fe is getting by its shortcut procurement.

Conclusions

Caveat emptor: Well-run cities and businesses – think Saco, ME – use the RFP/Bid process to get the best possible price for what they need or want;
Shortcutting the RFP/Bid process – especially for large and complex projects – is risky, even dangerous. It’s not something you do casually. If you do take that shortcut, exceptionally careful, deliberate, and vigilant Due Diligence is required to ensure that your needs are met at a minimum cost.

Santa Fe is shortcutting the RFP/Bid process using the dubious excuse of a five-year old contract in a rapidly advancing technology market. The Due Diligence exercised by the Department of Public Works failed – in a most dramatic fashion – to protect the city against being overcharged – by what may be greater than 60% – by a company that has never done a single street lighting job.

These are not the hallmarks of a responsibly or professionally run city.

Things you can do

Write or phone the mayor and all the city councilors and let them know what you think:

Is Santa Fe right to shortcut the RFP/Bid process?
Is Santa Fe right to overpay by at least 20% – and what might be more than 60% – for its new streetlights?
Is Santa Fe right to engage with a company that has never done a streetlight project before to select, install, operate, and maintain Santa Fe’s LED streetlights?
Do you think City Council Committees need to exercise greater and more responsible oversight on the operation of City Departments, like Public Works?

Write a letter to the Santa Fe New Mexican. Urge they look into this: they have resources and investigative experience that we don’t.

After writing or phoning the mayor and the councilors, attend Governing Body meetings and speak-out during the “Petitions from the Floor” – usually right at the beginning of the 6:00 PM part of the meeting – and express your concerns vocally.

Do this even if you already have written, or phoned, or spoken: sometimes responsible government requires repeating yourself until you are heard.

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