Government Construction Contracting, Part I: Procurement, Protests,and Debarment

Government Construction Contracting Part I: Procurement, Protests, and Debarment

Mark W. Leach, Esq.502.681.0583

[email protected]

Georgia – Indiana – Kentucky – Tennessee – Virginiawww.stites.com

The “Recent Unpleasantness”

• Bid Protests on the Rise• Public Contracting one of

remaining areas for work• Stimulus and BRAC tapering off• FY 2012 appropriations for

construction down 6% ($7B) from FY2011

• Compression of opportunities with more competition

Overview

• Rules for Kentucky Public Projects– State agencies– Local public authorities

• Bid Protests & Defending an Award• Resident Bidder Preference Law • Online Bid Protest Resource• Debarment

Procurement Rules

The ONE Common Rule

• Section 2, Kentucky Constitution:Absolute and Arbitrary Power Denied“Absolute and arbitrary power over the lives, liberty and property of freemen exists nowhere in a republic, not even in the largest majority.”

Kentucky Model Procurement Code (KMPC) KRS 45A

• Applies “to every expenditure of public funds” by the Commonwealth

• Includes:– Construction: “public improvements of any kind

to any public real property.”– Specifies selection of A & E

• Big loophole: opt-in by local authorities (& no protest procedure even if opted-in)

Procurement Procedures• Confusion: Finance & Transportation• Methods:

– Competitive Sealed Bidding (default)• Trans: “lowest and best bidder”;• Finance: “responsive & responsible bidder” for “the

best value.”– Competitive Negotiation

• Sealed Bidding not practicable• Bidding process did not achieve desired results• Bids exceed available funds but delay not permitted

Procurement Procedures• Methods:

– Noncompetitive Negotiation• Sole source• Competition is not feasible• Emergency

– Small Purchase Procedures• Finance, university, and legislature: no more than $40,000• All other agencies: no more than $10,000

– Professional Service Contract• Proof of Necessity form required• Award based on best qualified and after negotiation of

“fair and reasonable compensation”

Bid Issues• Prequalification

– Highway bidders must have certificate of eligibility– May be limited in type or amount of work

• Bid Mistakes– Withdrawal if mistake is material and not intended bid– If after bid opening, must show financial loss

• Subcontracting– Quotes subject to equitable estoppel,

but only one way– General contractor not bound by using a subs quote

Public Schools & Local Government• School if not opted into KMPC:

– Projects $7,500+: “lowest and best responsible bidder” after ad for competitive bids

– Board of Education Regulations• Public solicitation through newspaper ads• Public bid opening

• Local governments– Must publicly bid for $20,000+, but does not require award

to the lowest bid.– No regulation of contracting with A and E, and possibly CM

Resident Bidder Preference Law

Actually, the OTHER Common Rule

• KRS 45A.490-494• Resident Bidder Preference• Required to be in every public agency contract

– Resident bidders receive matching preference if a higher-evaluated non-resident bidder’s home state provides its residents a preference

– Ties go to resident bidders

Resident Bidder Preference• Resident Bidder

– Authorized to do business in Kentucky– One year prior to RFP:

• filed KY corporate taxes• paid into KY unemployment fund, & • maintained KY worker’s comp policy

• Non-resident determined based on– Principal office in certificate of authority or– Mailing address provided in bid

Resident Bidder Preference: How it Works

• Office of Procurement Services Website1. Rank all responsive, responsible bids with residency

identified;2. If highest ranked is non-resident from state with preference,

apply preference to all resident bidders;3. Re-score & Re-Rank (Lather, Rinse, Repeat)4. If tie, award to resident bidder5. If no resident bidder eligible for award, compare non-

resident bids based on price[Does this law now insert into every public contract the requirement to award to responsive, responsible bidders?]

Bid Protests

Bid ProtestsCommon Questions to Answer

• What are the bid protest procedures?– Check the RFP– Check the agency rules/website

• Who can protest? – Prospective or Actual Bidders

• What are you protesting?– A term of the Solicitation?—protest before

submitting bid– The Award?—protest after notice of award

Bid ProtestsCommon Questions to Answer

• When should you protest?– Check the RFP– Check the agency rules/website– KMPC: Filed within 2 weeks of knowing basis

• Presumed to know if posted on e-procurement website• Presumption overcome by clear and convincing

evidence• Importance of being diligent

– Pursuing Open Records Requests– Timely supplementing protests based

on new information

Bid ProtestsImpact/Consequences

• KMPC: Protest halts procurement unless emergency circumstances

• Is there a hearing? – Not under KMPC– Often, though, at local public authorities, e.g.

Fiscal Court or City Council Meetings• Possible outcomes:

– Award to protestor– Re-bid of RFP

Bid ProtestsImpact/Consequences

• Likely outcome: – Denial of protest and affirm award– KMPC: Presumption of correctness– But, not total loss, if received open records request

• Judicial Action?– KMPC: Disappointed bidders have standing– Non-KMPC:

• Disappointed bidders only have standing for “fraud, collusion and bad faith”

• Taxpayers, though, may have standing– Remedies uncertain, traditionally limited to bid preparation costs

On-line Bid Protest Resource

Bid Protest• Helpful online resource maintained by Office of

General Counsel, Finance Cabinet:• Bid Protest On-line Resource• http://finance.ky.gov/ourcabinet/caboff/OGC/

Defending an Award• Find out if protest or open records request

submitted• Request copy of protest and opportunity to

respond• File response defending award• Consider pre-emptive protest to secure an award

Debarment

Debarment• The “death penalty” for

government contractors• Pressure on U.S. agencies following

congressional hearings and GAO & Inspector General reports on fraud, waste, and abuse

• Result: Almost as many contractors proposed for debarment in 2011 as all proposed in 8 years of Bush Administration

Debarment• Federal-level: FAR 9.4

– The “blacklist”:• EPLS, Excluded Parties List System• Debarred, suspended, or proposed for debarment

– Causes • Conviction or civil judgment for fraud,

antitrust, embezzlement• Serious violation of government contract• Any other cause so serious that it affects

the present responsibility of the contractor

Debarment• Procedures

– Notice of proposal to debar– Opportunity to respond– If no genuine dispute over the material facts,

decision can be made– If genuine issue of fact, fact finding hearing

• Generally, not to exceed 3 years, but may be more or less

• Rest assured, policy is not to be used to punish, but only in the public interest for the Government’s protection

Debarment• Federal debarment at state level

– Read the RFP/Contract– Agency may not award contract over $100K without ensuring

successful vendor is not debarred by checking EPLS– Certify not debarred

• State debarment: suspension from bidding or probation– Reasons: failure to post bid or performance bonds; substitution

of commodities without prior approval; failure to comply with contract; failure to cure defective materials; refusal to accept contract; falsifying invoices; collusion; failure to pay taxes; failure to comply with prevailing wage law

– No more than 2 years– Rarely done

Questions?

Mark W. Leach502.681.0583

[email protected]