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 mleach@stites.com, or visit our website at www.stites.com

1. Government Construction Contracting
Part I: Procurement, Protests, and
Debarment
Mark W. Leach, Esq.
502.681.0583
mleach@stites.com
Georgia – Indiana – Kentucky – Tennessee – Virginia
www.stites.com

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. 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. Procurement Rules

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. 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. 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. 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. 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. 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. Resident Bidder Preference Law

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. 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. Resident Bidder Preference:
How it Works
• Office of Procurement Services Website
1. 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 bidder
5. 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. Bid Protests

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. 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. 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. 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. On-line Bid Protest Resource

21. 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/

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. Debarment

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. 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. 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. 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. Questions?

29. Mark W. Leach
502.681.0583
mleach@stites.com