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


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Stites & Harbison, PLLC attorney Mark W. Leach explains procurement, protests and debarment as they relate to government construction contracting.

For more information, please contact Mark Leah at, or visit our website at

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

  1. 1. Government Construction ContractingPart I: Procurement, Protests, andDebarment Mark W. Leach, Esq. 502.681.0583 Georgia – Indiana – Kentucky – Tennessee – Virginia
  2. 2. 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
  3. 3. 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
  4. 4. Procurement Rules
  5. 5. 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.”
  6. 6. 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)
  7. 7. 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
  8. 8. 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”
  9. 9. 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
  10. 10. 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
  11. 11. Resident Bidder Preference Law
  12. 12. 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
  13. 13. 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
  14. 14. 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?]
  15. 15. Bid Protests
  16. 16. Bid Protests Common 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
  17. 17. Bid Protests Common 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
  18. 18. Bid Protests Impact/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
  19. 19. Bid Protests Impact/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
  20. 20. On-line Bid Protest Resource
  21. 21. Bid Protest• Helpful online resource maintained by Office of General Counsel, Finance Cabinet:• Bid Protest On-line Resource•
  22. 22. 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
  23. 23. Debarment
  24. 24. 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
  25. 25. 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
  26. 26. 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
  27. 27. 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
  28. 28. Questions?
  29. 29. Mark W. Leach