‘Buy local’ law doesn’t sting Indy sewer project

A new state law that could add to the cost of public works projects didn’t impact one of Indianapolis’ most sizable bids this year.

Bids for a section of a massive sewer project came in between $5 million and $90 million below the estimated cost of roughly $275 million, officials from the city’s Department of Public Works said Friday. 

State law used to stipulate that bids be awarded to the firm that offered the lowest price and met specified criteria, but a new so-called “buy local” law requires municipalities to give preference to local bidders. 

David Sherman, the city’s public works director, said none of the nine firms that bid on Indianapolis' massive project were local.

Because of the level of expertise required for the project–a deep rock tunnel to add storage capacity for raw sewage–the bids were from big players in the tunneling field, Sherman said. Most were joint ventures.

“The nine we got are big-name firms,” Sherman said. “We got all the national and international players.”

The apparent low bidder is a partnership between California-based J.F. Shea Co. and Nebraska-based Kiewit, which offered a bid of $185.4 million. The bids will be awarded in October.

City officials estimated the so-called “buy local” law had the potential to drive up costs for the project by about $3 million, but some legal experts who have studied the law say it could have been millions more.

The law, which went into effect July 1, stipulates that firms in counties where public works projects are bid–or adjacent counties–get a leg up in the bidding process by receiving a price preference on their bids.

For projects of $100,000 or more, local governments must adjust a local firm’s bid to be 1 percent lower than what the firm actually offered. But the firms, according to some interpretations of the law, still get paid what they originally offered. That could result in local governments paying more for projects, should the local bidders be awarded the contract.

Others say the law goes further, requiring government units to award the bid to the local firm, regardless of cost.

Sherman said it’s likely the “buy local” law will impact future Indianapolis public works projects, which will include road and street work that require less-specialized bidders. He said it’s unclear how it will impact the cost of those projects, though, since most of the bidders for those kinds of projects tend to be local, anyway.

Citizens Energy Group, which will become the utilities’ official owner Aug. 26, will select the winning bidder in the deep rock tunnel project. Sherman said the city bid out the project prior to the transfer to meet federally mandated timelines.

Savings on the deep rock tunnel bid will reduce the overall cost of the $3 billion sewer overhaul project. That will help curb rate increases that are needed to fund the project.