Wednesday, July 24, 2013

When is the Price Not Right?

Most states and the federal government have adopted what is known as "Qualifications Based Selection" (QBS) for contracting with architects, engineers, and related professions.  Under QBS, a public agency may not use price as one of the evaluation criteria, but must select the most highly qualified firm and then negotiate the price with that firm.

Questionable QBS practices:  Some public agencies have pushed the limits of what is acceptable under QBS.  The following questionable selection strategies are sometimes used by agencies attempting to obtain the price for professional services prior to selection.
  • The envelope please:  Under this practice, an agency asks for each firm's proposed price in a sealed envelope which is submitted at the same time as the statement of qualifications.  The agency's Request for Qualifications (RFQ) will typically state that the envelope will not be opened until after a selection based on qualifications has been made.  The firm's proposed price in the sealed envelope then serves as the basis for beginning negotiations for a mutually acceptable contract amount.  Architects and engineers often question this practice and are concerned that an agency may open the envelope early, and such information will be used in making the selection decision.
  • Hours only:  Sometimes an RFQ will request that responding firms submit an estimate of the hours or level of effort that will be required for the contract.  However, because the range of typical hourly rates may be common knowledge, an agency can easily calculate which firm has the highest and lowest overall price.  This would appear to violate the intent and requirements of QBS.
  • Rates only:  Under this questionable practice, an agency does not request a proposed total fee from responders, but only the fully loaded hourly rates for each employee or class of employees that will work on the project.  No hours are requested under this dubious practice.  Because the intent of QBS is that public agencies will make selection decisions based only on the qualifications of the firms, asking for hourly rates seems to cross the line away from selecting based on qualifications only, and into the price arena.  In other words, architects and engineers will argue that cost factors (as opposed to qualifications only) are, in fact, being used as part of the selection process, violating the intent and requirements of QBS.
  • Budget:  Some agencies ask in an RFQ or interview for respondents to comment on and demonstrate how they will meet the agency's specific dollar amount budget.  If the responses focus on the specific dollar amount available, the question may well step over the line of what is acceptable as part of QBS.  On the other hand, it is acceptable to ask respondents how they will control costs or what their record is in meeting budgets.  But providing the agency's specific budget amount and asking how firms will meet that budget begins to look like pre-negotiation and using price as a factor in the selection process.  In other words, one firm may indicate that the budget is not sufficient and may be rated lower, resulting in price being used as part of the selection process instead of just qualifications, as required by QBS.
Checklist for compliance:  
  • Federal law:  Review the architectural, engineering, and related professions included in QBS under the federal Brooks Act, which is applicable if your project includes any federal funding.
  • State law:  Review any state law requirements regarding QBS.  In Washington state, QBS is governed by RCW 39.80.
  • Local practices:  Examine your evaluation criteria and practices to ensure they are consistent with federal and state QBS requirements.
Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC

No comments: