Bechtel Wins $320M San Jose Contract Under New Bidding Rules

The project is the first part of a $1.5 billion plan to overhaul the airport over the next 11 years.


May 22--In their first use of flexible bidding rules allowed under a 2004 ballot measure, city officials have recommended Bechtel Infrastructure Group over four other construction companies for a $320 million Mineta San Jose International Airport renovation.

San Francisco-based Bechtel, the largest U.S. contractor with 2005 revenues of $18.1 billion, was recommended by an eight-member selection committee that included city, business, labor, airline and airport officials.

"It was a competitive process," said Public Works Director Katy Allen. "We were really happy with the quality of the applicants."

The San Jose City Council will decide Tuesday whether to authorize negotiation of a contract with Bechtel for the $320 million project to upgrade Terminal A and replace most of old Terminal C with a new Terminal B by 2010. Negotiations may include adding $392 million worth of additional upgrades. The council would vote to approve the final contract in August.

The project is the first part of a $1.5 billion plan to overhaul the airport over the next 11 years, and is San Jose's largest since the $384 million new City Hall was completed last year.

It also is San Jose's first project to take advantage of more flexible bidding rules city voters approved with Measure D. Those rules allow the city to select a single company to both design and build projects over $5 million, and to consider factors such as the bidder's experience and record instead of just the lowest bid. The concept is widely used in private development and increasingly by governments as a way to avoid cost overruns and completion delays.

The city selection committee recommended Bechtel unanimously over competitors Hensel Phelps Construction, Turner-Devcon Joint Venture and Austin Commercial.

Bechtel, Turner and Devcon had pressed San Jose to adopt the new design-build rules. Bechtel lobbied the mayor's office, while Turner and Devcon spent $68,000 promoting Measure D's passage.

Although the measure faced no organized opposition, some council members felt such a change deserved more debate.

But Councilman Chuck Reed, who was concerned by the lack of debate over Measure D, said he's encouraged to see the airport project bidding has been competitive.

"That was a really important question, and it has been answered in a positive way," said Reed, a council liaison to the airport commission, who also is a candidate for mayor. "It will work as a competitive process."

Before approving the contract, the council will have to make a finding, required by Measure D, that the design-build process will save either time or money. City officials have estimated the streamlined process will shorten completion from 60 to 52 months. But they won't have an estimate of financial savings until the contract is negotiated, Allen said.

Because city officials and consultants already have estimated a budget of $320 million for the project, the contract negotiations will focus on three other elements, Allen said. They include the scope of the project, or how much work the city can get for its money; the schedule, or how quickly the company can complete each phase; and incentives, such as how the city and contractor might share any savings if the project comes in under budget.

To qualify for consideration, bidders had to show experience with an airport project of $75 million or more. They also were asked to provide information about their financial ability to complete the project, safety record and design-build experience.

The committee then scored their proposals on a scale of 100. Bechtel scored 72.86, Hensel Phelps 65.83, Turner-Devcon 65.01 and Austin 47.06. If city officials cannot reach a deal with Bechtel, they would negotiate with the others in the order they were ranked.

Bechtel distinguished itself from the others in its experience, approach and record of delivering projects on time and within budget, Allen said. The company's team includes a project executive who worked on Los Angeles International Airport, and Bechtel committed to working with local labor unions.

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