The Two Harbors City Council has voted to approve the awarding of the contract for the 2019 street and alley improvement project to the lowest bidder, albeit with some exceptions. The motion was approved unanimously Monday, May 13; councilor Miles Woodruff was absent.

The segments involved in this year's project include:

• Eighth Avenue, from Ninth Street to its west end;

• Ninth Avenue, from 15th Street to its east end;

• Alley north of Second Avenue, Second to Fourth streets;

• Alley north of Seventh Avenue, Eighth to Ninth streets;

• Alley north of Eighth Avenue, Eighth to Ninth streets.

Concrete prices cause concern

City engineer Joe Rhein, of Bolton and Menk presented the bid report the council and delivered the bad news. Although all of the four bids were fairly tightly grouped as far as price, they were all higher than the engineer's estimate for the project. The engineer's estimate was $772,000. The lowest bid received from Utility Systems of America, was $861,000, an approximate difference of $89,000.

Although the engineer estimate was within 1 percent of the prices quoted for the utility work, it was the street paving and concrete work prices that varied by more than 18 percent. When looking at the bid breakdown, Rhein noted the main difference came from the concrete prices, which were off by an approximate $61,000.

"We reached out the contractor to ask, can you check your concrete subcontractor and find out why those prices are so different than our estimate," Rhein said. "The reasons for the cost differences include the economy of scale, increases in union labor rates and benefits packages and increases in the price of concrete and related materials."

Rhein also stated that his firm has also observed that construction prices are generally higher than anticipated in 2019 due to the current strength of the economy and the high amount of projects.

"Contractors can be choosy and they can be more selective with their prices as well," Rhein said.

Rhein provided a few changes that could provide potential savings for the project. This included eliminating handrails for the stair segments to be replaced on the avenues as well as deleting a section of sidewalk to be replaced on the east side of Ninth Street, north of the alley south of Seventh Street, as it's almost entirely concrete work.

Assessing the situation

The problem with the high bids, Rhein said, was that the prices were off by more than 25 percent for several of the alleys included in the project. This is due to the amount of concrete used on the alleys' aprons, sidewalks and driveways.

The City has a special assessment policy where homeowners are responsible for an equitable portion of 50 percent of the paving costs for alleys. The League of Minnesota Cities guidelines for special assessments suggests that another public hearing be held if the assessment costs are expected to be greater by 25 percent than what was presented at the original hearing. This route would also push back awarding the bid and the construction of the project by approximately six weeks.

However, Rhein suggested an alternative to the council. If the council wished to move forward with the project, they could also consider a variation to the assessment policy for alleys included in the 2019 street and alley improvement project due to the situation.

The council took this approach and voted to proceed with the project, awarding the contract with the understanding that it will allow a variance of the special assessment policy for the alleys within the project. The specifics of the variance were not decided at the time, but it will need to be considered between now and the assessment hearing in the fall.