Government Construction Contracting Part I: Procurement, Protests, and Debarment
Mark W. Leach, Esq.502.681.0583
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