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Local contractor feels pain of bids

Jared Felkins Director of Content • Updated Jul 26, 2013 at 9:44 PM

Editor’s Note: This is the second in an ongoing series that closely examines the bid process among municipalities both locally and throughout the South.

When he’s not on the job site or at home enjoying a hot meal cooked by his wife, Eddie Conrad sits in his office preparing bid strategy.

The 67-year-old owner of Conrad Construction Co. in Lebanon often rolls the dice in an attempt to get work for his employees, many who have been with the company for more than 20 years.

When the subject comes up, Conrad pulls a copy of The Atlanta Journal-Constitution dated Sept. 18, 2010 from his desk drawer and wonders why the bid process in Lebanon and Wilson County couldn’t be more kind to local contractors.

“A couple of years ago, I was in Atlanta and happened to have some contractors from the Atlanta area sit at my breakfast table,” Conrad said. “We began discussing what type of business each of us was in. One of the contractors told me he had just gotten a $50 million bid and wasn’t lowest. He was about $3 million higher than the lowest bidder. He was a local contractor.

“He explained to me they get 5 percent for being local and 5 percent for being qualified to do the job. So they can be as high as 10 percent above the lowest bidder and still get the bid.

“When I got back to my hotel room, I found an article in The Atlanta Journal-Constitution addressing how locals had a percentage advantage over others that bid.”

The tattered AJC article Conrad has held onto for more than two years and references refers to an issue before the Gwinnett County, Ga. Commission at the time that would allow contractors local to that area a 15-percent cushion between them and the lowest out-of-county bidder. Though Conrad doesn’t know whether the measure passed in Gwinnett, it gives him ammunition to at least try and start the conversation among Lebanon and Wilson County officials.

“I brought this information to the attention of the Lebanon City Council, and found out through legal advice from the city attorney, he had advised the council he didn’t believe this practice was legal here,” Conrad said. “The council didn’t act.”

The Journal-Constitution also references a number of city and county governments that have enacted laws to favor their local contractors. In Atlanta, for instance, out-of-town bidders must provide a bid at least 10 percent lower than the lowest in-town bidder on jobs with more than $500,000 price tags. For jobs under $500,000, it’s 5 percent.

“A lot of surrounding in and out of county and state municipalities have a practice to promote growth at home,” Conrad said. “It was my understanding that most of the stimulus money Tennessee got for the 100-year flood went to Kentucky contractors. That’s millions of dollars that Tennessee contractors needed to keep employees working.”

A city records review by The Democrat showed the number of major project bids – those $200,000 or more in cost – have steadily decreased since 2006 when four-out-of-four bids went to Lebanon companies.

Two-out-of-three bids went to Lebanon companies in 2007; three-out-of-six bids went to Lebanon companies in both 2008 and 2009; two-out-of-seven bids went to Lebanon companies in 2010; and four-out-of-nine bids went to companies in Lebanon in 2011.

Of the 45 contracts given to The Democrat by Public Works Commissioner Jeff Baines since 2001, Conrad Construction was the low bidder on 12 – the most of all companies involved. Conrad Construction workers can presently been seen working on a new water main and sidewalk project along West Main Street in Lebanon.

But Conrad believes the city could do more to help local companies.

“Due to projects being awarded to contractors out of county and state, my company had its first layoff since I have been in business,” he said. “I have employees that have worked for me in excess of 25 years. Some of them feel captive to this layoff.

“At the time my employees were laid off, a Kentucky contractor was working on the west side of Lebanon, bringing out-of-state workers with them and bringing materials in from out of state. So no revenue was generated here locally.”

Conrad said he doesn’t mind if his company isn’t the lowest bidder as long as a local company gets the work.

At its Oct. 16 meeting, Ward 6 Councilor Kathy Warmath brought an early October state attorney general’s to the council’s attention. Historically, the Lebanon City Council has awarded bids to the lowest bidder regardless of where the company is located on the advice of the city attorney.

The opinion, requested by state Sen. Stacey Campfield, R-Knoxville, asks whether “the state or a local government can constitutionally impose residency requirements or incentives that give preferential treatment to contractors that are either residents of the state or of the area encompassing a local government?”

In his response, state Attorney General Robert Cooper Jr. said yes where a state or local government acts as a market participant rather than a regulator and buys goods or services on its own account, it may discriminate in favor of its citizens without violating the Commerce Clause of the U.S. Constitution. Cooper further said since the right to contract with a governmental entity is not a fundamental right, such as practice would not violate the equal protection requirements of either the U.S. or Tennessee constitution so long as the practice is supported by a rational basis.

However, Cooper said if the practice extends so far that it “burdens the right to pursue a common calling, it could be subject to challenge under the Privileges and Immunities Clause of the U.S. Constitution.”

Warmath gave each councilor a copy of the Oct. 3 opinion concerning the constitutionality of a local government to give preferential treatment to contractors who are residents of an area governed by a that local government.

"The attorney general sounds encouraging," Warmath said during the meeting, asking city attorney Andy Wright to review the AG's opinion and report back to the council. "It may take a state law to do it. Rep. [Mark] Pody and state Sen. [Mae] Beavers said they would carry the bill."

She said she would like to see the council pass a resolution in support of the idea.

"I don't think anyone could argue with that," Warmath said.

Berry, a retired judge, said the notion of rewarding contracts, not to the lowest bidder but based on preference determined by where a business is located, could be "dangerous territory."

"I knew you'd say that," Warmath said.

Conrad said he’s encouraged about movement on the issue on both state and local government levels.

“Sen. Beavers was contacted about researching a way to keep work at home,” Conrad said. “I understand that the state attorney general issued an opinion on this issue and Councilwoman Kathy Warmath brought this up at the last regular council meeting. She asked the city attorney to research and report his opinion at the next regular council meeting.

“I feel if it is a practice in Georgia, surely we can make it legal in Tennessee.”

Until action is taken, Conrad questions some practices he says are currently going on locally.

“I wonder how much revenue has not been collected in tax money in both Lebanon and Wilson County because contractors didn’t buy a license and there wasn’t enforcement,” he said. “I personally know there were several.”

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