Tuesday, September 30, 2014

Proposed NJ Law Would Require Disclosure of Construction Bidders Lists

The New Jersey Assembly has passed a bill that would require local public agencies to publicly disclose the names of possible bidders on public construction projects.  Currently, such disclosure is voluntary.

Disclosing names of potential bidders:  Bill A947 would require local public agencies to make public (if requested) the names of parties who have received a copy of bid documents, once three or more parties have received the documents.  Failure to do so would prohibit the public agency from accepting bids, and the project would have to be readvertised.  Agencies could also comply with the proposed law by publishing the names of potential bidders (parties picking up a set of the bid documents) on the agency’s website. 

Legislative support:  The bill passed the Assembly on June 23, 2014 by a 59-16 majority.  It has been sent to the Senate Community and Urban Affairs Committee (S2216).  Deliberation in the Senate could occur any time during the next 16 months.

Support for the bill:  A947 is being promoted by state labor groups and small businesses who argue that knowledge of potential bidder identities prior to the bid submission deadline will allow small businesses (particularly women and minority owned businesses) to “have timely access to bidders on public projects so that they can submit subcontracting bids to those bidders for the purpose of enabling those bidders to put together their lowest possible bids to the benefit of the local contracting unit.”  

Opposition:  Local governments oppose the change as, in their view, such forced disclosure may contaminate the sealed bidding process and lead to bid-rigging and collusion.  There is also concern that overall costs will increase due to litigation.

Precedents:  There are a number of public agencies in New Jersey where public disclosure of the bidders list is standard practice.  However, there is no set number of bid document recipients to trigger disclosure.  Also, in a closely related New Jersey court case (O’Neill Electric Co., Inc. v. theBoard of Chosen Freeholders of the County of Warren, 1997), the NJ Appellate court ruled that such required disclosure of the bidders lists would “facilitate collusive or bid-rigging arrangements” and not be in the public’s best interest.

Additional information:  The following links provide more information about this issue:

  • A947 – Text of the bill that passed the New Jersey Assembly
Should list of potential bidders be disclosed?  Different public agencies clearly have different practices on this issue.  Generally, I think it is best practice that public bidding be a transparent process.  This would suggest making the bidders lists available publicly.  However, in regions where this practice may encourage collusion, it may be wiser not to disclose the names of firms who have picked up the bid documents. 

Should number and names of bidders be disclosed?  Beyond the issue of the bidders lists, in order to prevent collusion and inflated prices, public agencies should not disclose the number of bids that have been received or the names of the bidders who have submitted bids.  It is at this point, rather than simply the names of bidders who have picked up bid documents, that collusion and inflated prices are more of a risk.  Some bidders are known to arrive at the bid submittal location with two bids and they submit one bid based on their competition.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Monday, September 29, 2014

Free Training Event in Lacey, Washington

Gaining Efficiencies, Transparency, and Trust through Empowering Contracting & Procurement Employees

When:  Tuesday, October 7, 2014 from 9:00 am to 10:00 am 

Where:  Saint Martin's University, Marcus Pavilion, Lacey, Washington 

Cheral Jones
Cost:  Free, but registration is required 

Presenter:  Cheral Jones
Description:  Evolution of today's procurement and contracting cultures helps staff utilize knowledge and skills to be problem solvers and decision makers.  Engaging staff, coaching and visualizing work through steps toward employee empowerment will improve efficiencies, resource management, transparency and trust, while helping to take your organization to new heights. 

Procurement Expo:  After the presentation, visit the expo hall to connect with various businesses that will have tables set up there. Open from 10:00 am to 4:00 pm.  Click here for more information. 

Sponsored by:
Registration:  Click here.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Sunday, September 28, 2014

Job Opening: Procurement Specialist

City of Vancouver, Washington
  • Position: Procurement Specialist
  • Location:  Vancouver, Washington
  • Closing Date:  Open until filled - First Review on October 8, 2014
  • Salary: $53,184 to $66,480 Annually
  • Job Summary: This position is responsible for administering the City's Procurement Card Program.  Also, the incumbent is responsible for providing other procurement services to City departments from various purchasing activities to contract administration.
  • For More Information and to Apply:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Job Opening: Contract Specialist 3

State of Washington, Department of Social and Health Services
  • Position: Contract Specialist 3
  • Location:  Lakewood, Washington
  • Closing Date:  October 13, 2014 at 11:59 pm, Pacific Time
  • Salary: $4,114 to $5,395 Monthly
  • Job Summary:  The Contracts Specialist 3 is part of the Consolidated Institutional Business Services (CIBS) contracting team. This position reports directly to the CIBS Purchasing & Contracts Supervisor. This position oversees the procurement, negotiation, administration and termination of contracts for CIBS supported Department of Social & Health Services (DSHS) Institutions including, but not limited to; client service contracts, intergovernmental agreements, data share agreements, outside vendor agreements, and purchased service contracts that in total encompass approximately 215 contracts worth an estimated $21 million. Position also functions as the key contract coordinator for contracts within assigned institutions.
  • For More Information and to Apply:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Wednesday, September 24, 2014

Two Types of Fraudulent Bonds

Public agencies regularly require a variety of bonds from contractors including bid bonds, performance bonds, payment bonds, retainage bonds, and warranty bonds.  The bonds are backed by sureties that promise to step in and protect the public agency if a contractor fails to meet their various obligations described in the bond.  If a bond is not legitimate, however, a public agency has no protection.  There are a couple of different scenarios of how fraudulent bonds are issued. 

Fraudulent representation as a surety:  Some individuals have posed as brokers representing bonding companies, issued fraudulent bonds, and collected bond premiums from unsuspecting contractors who then submit the bogus bonds to public agencies.  Last year, a report in Engineering News-Record described how 22 contractors in nine states lost more than $3 million to two men who claimed to be authorized to issue bonds for Chubb subsidiaries Pacific Indemnity Co. and Federal Insurance Co. 

Fraudulent bonds:  Some contractors have used Photoshop and copy machines to dummy up bonds that they then submit to public agencies to comply with bonding requirements for a contract they have been awarded.  Agencies who unwittingly accept such bonds end up with no protection from these bogus bonds, nor has there been any financial review by a surety of the contractor's financial stability.  Click here to read a previous blog posting discussing verifying bonds and referencing a number of forged bond cases.  

Is a bond legitimate?  It is a prudent business practice for public agencies to verify with the bonding company that a bond has been issued.  Bonding companies authorize others, known as an "attorney-in-fact" to obligate the surety.  The attorney-in-fact must, however, report to the surety when they have issued a bond.
  • Research the surety's phone number:  Independently research the surety's phone number.  Do not rely on a phone number that may be on the bond.
  • Call the surety:  Call the surety to verify the legitimacy of the bond.  
  • Verify for all or some contractors:  Some public agencies do not verify bonds for well-known contractors they have done business with for years, and that pose a low risk.  However, researching the legitimacy of a bond for a new or unknown contractor is a good idea.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Tuesday, September 23, 2014

Strategies for Dealing with Bid Protests

Some bid protests have merit, while others are frivolous. Regardless of how valid a bid protest is or isn't, it can wreck havoc on a project's schedule, and cause significant delays and added costs, especially if it moves to court. 

Recognize the high stakes:   It's important to remember that emotions can run high when award of a contract is involved.  A bid protester desperately wants the project, while the low bidder believes they are entitled to the award.

Listen carefully:  I think the best practice with bid protests is to invite the protester and the firm whose bid is being protested in for a meeting to discuss the protest.  While this isn't a formal hearing, it should be conducted with some basic ground rules.
  • Listen to the protester:  Give the protester the opportunity to verbally state the reasons why they believe their protest is valid and why they should be awarded the contract and not their competitor.
  • Ask questions:  Ask the protester the hard questions about their protest
  • Understand protester's position:  Communicate clearly that you have understood the protester's positions, whether you agree with them or not.
  • Listen to the other side:  Provide the low bidder (whose bid is being protested) with the opportunity to state why the bid protest is without merit, and why they should be awarded the contract.
  • Ask more questions:  Ask the low bidder the hard questions about points of the protest that may have merit.
  • Communicate understanding:  Communicate clearly that you have understood the low bidder's positions, whether you agree with them or not.
  • Keep an open mind:  Bring all of the issues related to the protest into the open and keep an open mind.
Avoiding court:  By treating both parties to a bid protest with respect, fairness, and dignity as you pursue the facts, it can help prevent parties from escalating the issue into a lawsuit.  If both the low bidder and protester feel that they have been treated fairly, regardless of whether your decision favors them or the other party, you can significantly reduce the likelihood that one of the parties will take the issue to court. 

Protest policies:  
  • Does your agency have clear protest policies that are fair and in compliance with any state requirements?  
  • Do you communicate your protest policies in your bid documents?
Involve your attorney:  It's a good idea to involve your attorney if you receive a bid protest, especially if the bid protest letter has come from the protester's attorney.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Wednesday, September 17, 2014

Issues to Consider in Privatizing Government Services

Rather than employing public agency staff to perform essential governmental services, some agencies are contracting out such services in a move toward privatization.

Privatization as a form of P3:  In an article entitled "Privatization: Determining the Role of P3s," that appeared in the August 2014 edition of Government Finance Review, author Kyle Steitz refers to privatization as a form of Public-Private Partnerships (P3) even though P3s are often focused on "economic development projects proposed by developers who are looking for financial assistance from a jurisdiction that stands to benefit from the project."

Key privatization considerations:  In reviewing whether to privatize our contract out government services, the article suggests the following issues that must be addressed:
  • Preliminary evaluation
  • Retaining advisors or experts
  • Public participation
  • Economic and fiscal impact analysis
  • Financial negotiations
  • Service level implications
  • Risk assessment
  • Monitoring of performance and results
Contracting implications:  Privatizing existing governmental functions requires a different set of decision-making processes and contract documents than is typical for when government agencies procure services. And, of course, agencies must address considerations of what is permitted by applicable laws and the impact of privatization on collective bargaining (union) agreements in place for agency employees who may be affected by privatization.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Tuesday, September 16, 2014

When Should You Notify a Bidder of a Non-Responsive Bid?

Bidders often make mistakes in not submitting all required documents or filling out forms properly.  So when should a bidder be notified that their bid is non-responsive?

Options for notification:  A public agency could notify the bidder of a non-responsive bid at the following points in time:
  • Sooner:  As soon as the irregularity is identified and a decision has been made that the bid is non-responsive.
  • Later:  When the public agency recommends an award of the contract to another bidder
Sooner is better:  Generally, it is better to notify a bidder of a non-responsive bid as soon as the determination has been made that the bid is non-responsive. One of the advantages of doing this is that it helps to protect the project's schedule.  In other words, if a public agency waits until the time of an award recommendation, and a protest is made then, the protest could end up delaying award and the start of the project.  By notifying the bidder early, if they do protest the non-responsive determination, it provides the public agency with more time in which to address the protest, and hopefully keep the project's schedule.

What bids are non-responsive?  If the irregularity in the bid is material, the bid should be rejected as non-responsive.  If the irregularity is immaterial, public agencies have discretion whether to accept the bid as responsive or reject it as non-responsive.  The test as to the materiality of an irregularity is whether it gives one bidder a substantial advantage or benefit not enjoyed by other bidders. 

Case-by-case determination:  Talk with your attorneys and evaluate potential non-responsiveness issues on a case-by-case basis.  It is important to maintain the fairness and equity of the competitive bidding process, and so material irregularities should not be waived and those bids should be rejected as non-responsive.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Tuesday, September 9, 2014

No Competitive Bids: Agency to Pay $5 Million to Settle Lawsuit

In 2010, the Washington, DC Metropolitan Area Transit Authority (Metro) awarded a $14 million federally funded contract without competition to a consulting company hired to oversee an integration of the agency's financial and business computer systems.  

Settlement:  In a settlement of a whistleblower lawsuit, Metro agreed on August 20, 2014 to pay more than $5 million to settle the case, without admitting any wrongdoing.  Metro will also pay $390,000 to the worker who alleges he was fired for raising concerns about the lack of competition.

Federal audit:  Metro's procurement problems goes beyond just this one contract.  In an audit commissioned by the Federal Transit Administration, FTA found that Metro's procurement practices allowed award of other contracts without competition and contracts were awarded to preferred vendors without adequate qualifications.  As a result, FTA has restricted Metro's use of federal funds until Metro implements procurement reforms that demonstrate an ability to properly manage procurement processes.

Additional information:  Click on the links below for more about Metro's procurement issues:
Lessons learned:  The following are some of the issues raised by Metro's problems:
  • Policies:  Have clear procurement policies and practices that comply with applicable laws and best practices.
  • Chief Procurement Officer:  Ensure the agency has a chief procurement officer with sufficient authority to ensure compliance with procurement requirements, even when political pressure is exerted by elected officials and agency leadership.
  • Training:  Regularly train agency leadership and staff on procurement policies.
  • Grant compliance:  Ensure compliance with federal grant requirements.
  • Review waivers of competition:  Establish a process with sufficient internal checks and balances for when goods and services may be obtained without competition.
  • Documentation:  If no competition is used, document the basis for waiving competitive selection processes.
  • Public perception:  Consider the perception of how waiving competitive selection procedures will be viewed in the newspaper and on social media 
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Monday, September 8, 2014

Training: Public-Private Partnerships for the Delivery of Public Infrastructure

Public-Private Partnerships for the Delivery of Public Infrastructure - An Overview 

When:  September 17, 2014, 4:45 pm - 7:00 pm (Pacific Time) 

Where:  Seattle, WA (Ivar's Salmon House, 401 NE Northlake Way) 

Cost:  $37 (includes dinner) 

Sponsored by: APWA, Washington State Chapter 

Information and registration:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Washington Construction Law Seminar on September 18-19

21st Annual Washington Construction Law Seminar:  I've attended this seminar in previous years and always found it to be very helpful.  I will be attending again this year.

When:  September 18-19, 2014 (9:00 a.m. to 5:00 p.m.) 

Agenda and Speakers:
  • Federal Construction Law - New Developments (Bruce P. Babbitt)
  • Washington State Public Works Competitive Bidding and Bid Protests (Arnold R. Hedeen)
  • Key Clauses of Construction Contracts (Alan Bornstein)
  • Integrated Project Delivery (Scott R. Sleight)
  • Key State Tax Considerations for Construction Projects (George C. Mastrodonato)
  • Building Information Modeling (BIM) (Brendan J. Peters)
  • Construction Changes/Differing Site Conditions (John P. Ahlers)
  • What Happens When Someone in the Chain Goes Bankrupt? (Jerry N. Stehlik)
  • Discovery Issues in Construction Claims (Andrew L. Greene)
  • Washington Construction Law - New Developments (Paul R. Cressman, Jr.)
  • Claims Against Design Professionals (Stanton P. Beck)
  • Design Professional Considerations (Blaine J. Weber)
  • Ethical Considerations for Construction Lawyers (John A. Strait)
  • Insurance in the Construction Industry (Todd C. Hayes)
  • Lien and Bond Claims; Dealing with Sureties (Kerry C. Lawrence)
  • Construction Mediation (Henry C. Jameson)
  • $645 - Government employees
  • Other fees for different categories
  • The sponsor of this training, The Seminar Group, will provide my blog readers with a $50 per person discount off of the regular tuition rate.  Call The Seminar Group to register and mention Mike Purdy and the discount code "SPP50." 
  Credits:  Approved for continuing education credits with:
  • Continuing Legal Education (CLE) credits for Washington, Oregon, Idaho, California, Alaska
  • Construction Risk & Insurance Specialists by IRMI
  • AIA (American Institute of Architects)
  • American Institute of Constructors
  • Construction Management Association of America
Sponsored by:  The Seminar Group

Information and registration:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Sunday, September 7, 2014

Job Opening: Procurement and Supply Specialist 2

State of Washington, Department of Social and Health Services
  • Position: Procurement and Supply Specialist 2
  • Location:  Lakewood, Washington
  • Closing Date:  September 17, 2014 at 11:59 pm, Pacific Time
  • Salary: $2,994 to $3,918 Monthly
  • Job Summary: This position maintains inventories and ensures the accountability of purchased items and services for DSHS Institutions as part of Consolidated Institutional Business Services (CIBS).  Functions include planning, coordinating, and performing the procurement of services, supplies, materials, parts and equipment for specialized commodity areas in accordance with state laws and requirements.
  • For More Information and to Apply:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Thursday, September 4, 2014

Job Opening: Assistant Buyer

King County (WA)
  • Position: Assistant Buyer
  • Location:  Seattle, Washington
  • Closing Date:  September 11, 2014 at 4:30 pm, Pacific Time
  • Salary: $54,100 to $68,556 Annually
  • Job Summary:  The duties of the individual in this position will include the following: Prepare purchase orders and change orders from approved requisitions in an automated financial system. Interact closely with agency staff throughout King County, and work with vendors and contractors to ensure that county business is conducted openly, inclusively, and provides the best value.  Support fellow procurement staff in developing bids, specifications, tabulations, and solicitation documents.  Monitor expenditures and other forms for compliance.  Establish and administer small dollar value contracts for individual agencies.  Resolve contract and procurement issues.
  • For More Information and to Apply:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Job Opening: Assistant Director, Construction Diversity

University of Washington
  • Position:  Assistant Director, Construction Diversity
  • Location:  Seattle, Washington
  • Closing Date:  Open Until Filled
  • Salary: Salary is commensurate with qualifications and experience
  • Job Summary:  The Assistant Director of Construction Diversity will closely monitor and grow the business opportunities available to minority and women-owned firms for the University's Capital Projects Office (CPO), develop goals and program metrics and administer plans to ensure that CPO reaches its goals, and will collaborate with the University's Business Diversity Program as well as the University's Procurement Services to further the University’s commitment to enhancing the diversity of businesses competing for work with the UW.
  • For More Information and to Apply:  Click here.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

Wednesday, September 3, 2014

Will Public Agencies Be Required to Accept Retainage Bonds?

In Washington state, a contractor may submit a bond to a public agency in lieu of the agency holding 5% retainage from every progress payment.

Current state law:  The current state law (RCW 60.28.011) requires that a public agency must accept a retainage bond from the contractor, "unless the public body can demonstrate good cause for refusing to accept it."  It has always been somewhat unclear exactly what this exception means.  I have often stated that the one condition that may be "good cause" for not accepting a retainage bond is if a surety refused to previously honor claims against a retainage bond on a different project.

Agency practices:  Some public agencies have made it a practice to not accept any retainage bonds, regardless of whether they have determined "good cause" for not accepting such bonds.  This has become a matter of concern for contractors and bonding companies, and led to the introduction of new legislation.

Proposed legislation:  Substitute Senate Bill 6110, which unanimously passed the Senate on February 12, 2014 would remove the discretion that public agencies currently enjoy in deciding whether to accept a retainage bond or not. The bill did not, however, come up to a vote in the House, presumably because it ran out of time to be considered.

Impact of SSB 6110:  SSB 6110 would do two things:
  • Require acceptance of retainage bonds:  The current "good cause" discretion public agencies have would be repealed and agencies would be required to accept any retainage bond as long as the surety has an A.M. Best rating of "A-" or higher.
  • Remove agency discretion on Payment and Performance Bonds:  The proposed legislation would also require public agencies to accept Payment and Performance Bonds from sureties without some of the review that currently is part of the process, such as relating to the A.M. Best rating of the surety and other conditions.
2015 legislative session:  Presumably, SSB 6110 will be reintroduced in the 2015 legislative session.  Given its unanimous approval in the Senate in 2014, there is a high likelihood that the bill may be approved and become law in 2015.

Is SSB 6110 a good idea?  In my opinion, SSB 6110 is a short-sighted solution that does not address some of the real issues surrounding retainage and bonding on public works projects.  In addition, it strongly favors the interests of contractors and sureties, without taking into account the interests of public agencies (and the public) subcontractors, and suppliers.
  • Eliminates options and protections:  Without some ability on the part of public agencies to refuse to accept a retainage bond from a surety who has not faithfully paid claims on previous retainage bonds, SSB 6110 has the impact of eliminating the rights of subcontractors and suppliers from collecting payment from the retainage (and state agencies on USDOT funded projects where no retainage may be withheld). Thus, the statement in RCW 60.28.011 that retainage is a "trust fund" for protected parties becomes an empty shell.   
  • Eliminates protections for the public:  The amendments to RCW 48.28.010 in SSB 6110 eliminates discretion by public agencies in assessing whether a surety is financially secure to post a Payment and Performance Bond or Retainage Bond.  This shift of balance in favor of sureties over public agencies and the protection of the public is not good public policy.
A contractor's view:  Seattle attorney Matt Paxton of Ahlers and Cressman has written a blog posting on SSB 6110, noting that from a contractor's perspective the bill would be beneficial.  Mr. Paxton's definition of a retainage bond, however, is really more the definition of a warranty bond.  A retainage bond does not guarantee "that the contractor will carry out all necessary work to correct defects discovered after completion of the contract, even if full payment has been made."  Rather, a retainage bond guarantees that the surety will pay subcontractors, suppliers, and workers who have not been paid by the contractor.  Click here to read Mr. Paxton's blog.

What will happen in 2015?  Without public agency opposition to SSB 6110, this bill has a good chance of becoming law.  Public agencies that are concerned about it should work with their lobbyists and associations to discuss the impacts of the bill further.
Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC