1
Cooperative
Purchasing
American Bar Association Section of Public
Contract Law, April 8, 2016
2
Cooperative Purchasing – Why now?
 Every year, one out of every three dollars
governments spend goes toward purchasing
something -- from photo copier ink to new
vehicle fleets -- to help provide services.
 Purchase Power: A Special Report on State
Procurement, Governing Magazine, February 17,
2016
 Public Entities Seek to




Leverage Collective Buying Power
Stimulate Competition – Best Value
Reduce of Administrative Time/Expense
Gain Favorable Terms and Conditions
3
Cooperative Purchasing on
the Rise
 All responding jurisdictions (states) (44) except
for Puerto Rico indicated that they have legal
authority for any cooperative purchasing.
 Survey of State Procurement Practices, Summary Report, September
2015, National Association of State Procurement Officials
 The share of total awards that can be linked to a
cooperative purchasing contract has increased
from 1.9% to 2.2% nationwide from 2012 to 2014.
 LEVERAGE COOPERATIVE PURCHASING TO GROW YOUR GOVERNMENT
SALES, Onvia, 2015
 We foresee stronger adoption of cooperatives,
particularly in technology, in the execution of
cooperative procurements.
 Utah Legislative Auditor’s report, Summary of Report 2014-11
4
Types of Cooperatives
 True Cooperatives
 Two or more organizations combine their requirements
and solicit bids or offers for goods or services.
 Piggyback Options
 One or more organizations represent their requirements
and include an option for other organizations to “ride”
or “bridge” the contract as awarded.
 Third Party Aggregators
 An organization brings together multiple organizations
to represent their requirements and manage the
resulting contract or contractor.

National Association of State Procurement Officials, Strength in Numbers: An Introduction
to Cooperative Purchasing (2010), available at http://www.naspo.org.
Cooperative Purchasing
Organizations
6
Legally Sufficient Solicitation
Practices
 The cooperative procurement authority granted to
governments sometimes requires the underlying contract to
have been competitively awarded by a government entity.
 FRAMING AND DOCUMENTING COOPERATIVE PROCUREMENTS,
Prepared for the NASPO 2015 State and Local Procurement Law
Institute
 Some entities pattern their provision regarding compliance
with code requirements after that in the 1979 MPC:
 Where the Public Procurement Unit administering a Cooperative
Purchase complies with the requirements of this Code, any
Public Procurement Unit participating in such a purchase shall
be deemed to have complied with this Code. Public
Procurement Units may not enter into a Cooperative Purchasing
agreement for the purpose of circumventing this Code.
 MPC § 10-207. C.R.S.§ 24-110-207. S.C. Code § 11-35-4880.
7
States Add Their Own
Statutory Requirements
 21 of 44 states reported they must be named as a
potential participant in the solicitation
 19 of 44 states reported they must advertise the
original solicitation.
 6 of 44 state reported they must participate in the
evaluation/award decision
 9 of 44 reported they must approve the final contract
 17 of 44 reported “other” requirements
 10 of 44 reported None of the Above
 Survey of State Procurement Practices, Summary Report,
September 2015, National Association of State Procurement
Officials
8
How to Set Up a Proper
Cooperative Purchase to
Accommodate all These
Requirements
 There are a variety of cooperative types, and the
ability of an individual state to participate in a
cooperative may be a function of the particular
cooperative structure.
 True cooperatives are those where the
governmental entities combine their requirements
and jointly solicit bids or offers for goods or services.
 They each participate through the planning,
requirements definition, procurement, and
sometimes contract administration phases.
How the process should work?
•
•
•
•
Individual
Entity
Participation by other public entities from the
beginning
Participation (through Sourcing Team) in creation of
solicitation, evaluation, award and on-going contract
management
Entirely compliant with Procurement Laws
(including advertising)
Executes Master Price Agreement for Participating
Addendums
Lead
Entity
&
Sourcing
Team
RFP &
Evaluation
Master
Agreement
Lead Entity
Participating
Addendums
10
Before You Join a
Cooperative Contract
 Legal Scan
 Do my procurement
statutes allow me to
join the
cooperative?
 Do I know and trust
the expertise of the
procurement
officers who
conducted the
solicitation?
11
Before You Join a
Cooperative Contract
 Legal Scan
 Have they
processed the
solicitation with the
same care that I
would?
 Did I advertise the
solicitation locally?
 If not, can I
piggyback?
12
Before You Join a
Cooperative Contract
 Business Case
Scan
 Does the
cooperative
contract meet our
needs?
 Are the terms and
conditions
favorable?
 Is the price better
than I could get if I
bid it myself?
13
Before You Join a
Cooperative Contract
 Political/Risk Scan
 Who do we buy it
from now?
 Are they resident
vendors?
 Are they
disadvantaged
vendors?
 Who might they
complain to if we
join the
cooperative?
14
Voight Shealy
Education & Outreach Director
803-760-0302
[email protected]
American Bar Association
Section of State and Local Government Law
2016 Spring Meeting
“Update on Public Record Requests and Bid Protests”
Adam Stone, Jones Walker LLP, Jackson, MS
Kaytie Pickett, Jones Walker LLP, Jackson, MS
April 7-10, 2016
Intercontinental Hotel
San Juan, PR
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I.
Introduction
Public records requests should be a part of any bid protest strategy. In cases in which
bidding is reopened, the losing bidders obviously stand a greater chance of success if they can
first obtain the winning bidder’s price, or better yet, its pricing formula. And in submitting bids,
bidders should be cognizant of the potential risks of disclosure of what they consider to be
confidential information.
The ways in which different states treat a bidder’s confidential information varies
significantly from state to state. In light of corruption issues, some states have taken measures
to publish awarded contracts on government websites. Others have specifically declared that
certain information, such as contract price, is not exempt from disclosure. Still others have not
addressed the balance between the protection of trade secrets and the disclosure of public
records.
This discussion is limited to how different states treat price and the components that go
into price, both in proposals and in awarded contracts. It assumes that price, or at least the
formula used to determine price, would otherwise constitute a trade secret, though this
assumption may prove false depending on the nature of the contract. See Agricultural Labor v.
Richard A. Glass Co., 175 Cal. App. 3d 703, 221 Cal. Rptr. 63, 70 (1985); Carbonic Fire
Extinguishers v. Heath, 190 Ill. App. 3d 948, 138 Ill. Dec. 508, 510, 547 N. E. 2d 675, 677 (1989).
Compare Aristocrat Window Co. v. Randell, 56 Ill. App. 2d 413, 206 N. E. 2d 545, 553 (1965) (“A
price list in itself is not necessarily a trade secret”); Apollo Stationery Co. v. Pilmar, 11 Misc. 2d
263, 265, 268, 173 N. Y. S. 2d 854, 857 (1958) (“Prices are not trade secrets in the sale of
ordinary merchandise”). How states differ in their approach to this information may affect how
your clients choose to pursue proposals and bids across the country.
Given the limitations of time and space, the following discussion is not exhaustive and
does not attempt to address every state’s approach. The states discussed are representative
samples meant to illuminate different ways states treat this information.
II.
States That Have Statutes That Say Price in a Contract is Not Confidential
Some states have recently amended their public records statutes to state that the
pricing information provided in a bid is not proprietary information nor a trade secret. These
states are balancing the public’s right to know how public funds are spent above a winning
bidder’s right to protect its proprietary information. In construction projects, where each
project is unique, this makes sense and causes few problems. Because every construction
project is different, the price of each project will vary; therefore, there is little harm to the
winning contractor in having this information released. Balancing this harm versus a citizen’s
right to know what a new public building costs is easy.
When dealing with service or commodities contracts, however, balancing the harm
versus the public’s right to know is more difficult. Many of these contracts, like the right to
provide food services to a public institution, involve formulas to determine the amounts paid to
the vendor and, in some cases, to the state. These contracts may be rebid every year or two,
and the bidders may be competing for the same or similar contracts in other jurisdictions.
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Forcing the winning bidder, and only the winning bidder, to provide its pricing information
(especially formulas that show information such as costs and profit margin) places the winner
at a disadvantage in future bids.
For example, Mississippi recently amended its public purchasing laws to state, “For all
procurement contracts awarded by state agencies, the provisions of the contract which contain
the commodities purchased or the personal or professional services provided, the price to be
paid, and the term of the contract shall not be deemed to be a trade secret or confidential
commercial or financial information under this section, and shall be available for examination,
copying or reproduction as provided for in this chapter.” Miss. Code. Ann. § 25-61-9 (West).
This law therefore only explicitly applies to the winner. Likewise, Georgia, Florida, and
Pennsylvania both require that the winning contract be published on a state website; Florida
and Georgia specifically state that the price must be disclosed. See Ga. Code Ann. § 50-5-67
(West); Fla. Stat. Ann. § 215.985 (West); 65 Pa. Stat. Ann. § 67.1702 (West).
Losing bidders in states like these should consider using these statutes as swords to
obtain their competitors’ trade secrets through public records requests. By doing so, losing
bidders can obtain valuable information at little cost. Winning bidders seeking to protect this
information can argue that the definition of “price” should not include its trade secrets. For
example, in the case of a food services contract, the argument would be that the cost of a
hamburger to the state is the cost that must be disclosed. However, how the cost of the
hamburger was set and how the proceeds from the sale of the hamburger are divided can be
argued to be trade secrets. Losing bidders desiring this information for a bid protest should
argue their need to discover how the proceeds from the sale of the burger are divided to
determine the value of the winning bid. To deny this information is to deny the right to contest
the bid.
Some potential bidders may wish to avoid bidding in states in which their proprietary
information is poorly protected. This is especially true if there are more lucrative contracts up
for bid in other jurisdictions.
III.
States That Made Bids and Proposals Public Records
Some states have statutes that make all bids, not just the winner’s contract, public after
the award. For example, the Kentucky attorney general has opined, “Documents tendered as
part of the competitive sealed bidding are public records even if the bids are rejected and the
competitive negotiation procurement process is subsequently employed.” Kentucky OAG 98-11
(citing KY ST § 45A.080). In Pennsylvania, in addition to the awarded contract being published
as discussed above, all bid documents are considered public records. See PA Associated
Builders & Contractors, Inc. v. Commonwealth Dep’t of Gen. Servs., 996 A.2d 576, 580 (Pa.
Commw. 2010) (noting that while all bidding documents are considered public records after
bids received and opened, when RFP process is used,” [u]nsuccessful proposers are debriefed
as to their own proposal, their ‘relative rank and the final scoring process,’ and the successful
proposer’s total cost). In North Carolina, the contents of any proposals become public records
14 days before the award of any public contract. N.C. Gen. Stat. Ann. § 143-129.
These states do not specifically address price, but one can assume that if the entire bid
is public, then the price is as well. Utah’s regulations make bids/proposals public if requested,
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and “[p]ricing may not be classified as business confidential and will be considered public
information.” Utah Admin. Code r. R105-1.
Bidders in these states thus know that their entire bid will become public. While this
puts potentially proprietary information at risk, it puts all bidders’ information equally at risk
and not just the winner’s information. Potential bidders in these states know that their bid will
be a public record and can decline to bid or attempt to draft their proposal to omit critical trade
secrets. Omitting proprietary information may risk a proposal being unresponsive. However, if
the information omitted is valuable enough, that may be a risk a bidder should take.
Bidders in these states should, as a standard practice, request all bids/proposals. It is an
easy way to obtain the competitions’ trade secrets and the only way to combat the fact that
your competition will probably obtain your information.
IV.
States That Protect Pricing to Varying Degrees
Several states affirmatively protect a bidder’s pricing information, though to varying
degrees. For example, in Minnesota, local authorities are instructed by statute to implement
contract award procedures that “establish[ing] safeguards during the procurement process to
preserve confidential information and proprietary information supplied by those submitting
proposals in accordance with chapter 13, including, but not limited to, an offeror’s price,
technical solutions, innovative or unique technology, and innovative or unique use of
commercially available items.” Minn. Stat. Ann. § 383B.158 (West). This is the strongest
protection.
Nevada does not protect the overall amount of a bid, but it does protect as “confidential
business information” “any information relating to the amount or source of any income, profits,
losses or expenditures of a person, including data relating to cost, price, or the customers of a
bidder which is submitted in support of a bid.” Nev. Rev. Stat. Ann. § 332.025 (West). This
approach is in line with the cases holding that price itself is ordinarily not a trade secret, but the
underlying data may often be.
While Vermont does not have a statute that explicitly protects pricing information, its
Public Service Commission has held that pricing information, in certain situations, is protected.
The Commission held:
We are providing confidential treatment for the Reed & Reed and
Bemis pricing information because of the potential to
disadvantage GMP (and by extension, its ratepayers) in future
competitive bids since potential bidders would know the prices
GMP recently accepted for similar projects.
Green Mountain Power Corps. 2012 Base Rate Filing., 8281, 2011 WL 5276553, *1 (Oct. 21,
2011). The Commission balanced how often the agency solicited bids for similar projects,
reasoning that one-off projects did not create the same potential competitive disadvantage.
Bidders in these states may be able to protect their price or at least their underlying
pricing information. Requests seeking proprietary information may be met with suits seeking to
protect the requested information, which would likely prevail. Those seeking their competitors’
information in these states should balance the value of the requested information versus the
cost and probability of ever obtaining it.
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V.
Conclusion
In states that lack any authority on whether price and/or a pricing formula is
confidential, it remains up to the state courts to determine what can be protected. We hope
that the preceding overview gives you a strong basis for arguing which position best protects
your client’s interests.
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Mississippi Procurement Rules and Regulations
Prepared by
Adam Stone and Kaytie Pickett
Jones Walker LLP
Email: [email protected] and [email protected]
I.
Statutory Reference
Mississippi’s procurement laws are generally found in the Public Purchases volume of the
Code, Volume 31 (Mississippi Code Titles 29 and 31, primarily Sections 29-17-1 through 31-3141). Volumes 23 through 25 of the Code contain statutes relating to Regulation of Trade,
Commerce and Investments, including the UCC. The following statutes are of particular
importance:
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
II.
Public Construction Contracts
Miss. Code Ann. 31-3-21
Public Works Contracts
Miss. Code Ann. 31-5-3, et seq.
Public Purchases
Miss. Code Ann. 31-7-1, et seq.
Public Leases of Buildings, Facilities, and Equipment
Miss. Code Ann. 31-8-1, et seq.
Surplus Property
Miss. Code Ann. 31-9-1, et seq.
Counties Utility Services
Miss. Code Ann. 19-5-185
Education Transportation and Textbooks
Miss. Code Ann. 37-41-101
Miss. Code Ann. 37-43-25
Correctional System Operation and Management
Miss. Code Ann. 47-5-105
Airport Authorities
Miss. Code Ann. 61-3-37
Highways, Road, and Bridges
Miss. Code Ann. 65-19-31
Public Utilities
Miss. Code Ann. 73-35-16
Regulations
Mississippi has different procurement rules and regulations depending on the type of
contract (construction, purchase, or service) and the agencies involved. Service contracts fall
under the purview of the Mississippi State Personnel Board. Contracts for the purchase of
commodities and equipment are regulated by the Department of Finance and Administration
(“DFA”). Construction contracts also fall under the DFA but have their own regulations
Mississippi
1
promulgated by the Mississippi Bureau of Buildings. The following regulations are of particular
importance.
III.
A.
Procuring Agency Regulations
www.sos.ms.gov/Regulation-Enforcement/Documents/Index_of_Titles.pdf
B.
Services Contracts: Mississippi Personnel Service Contract Review Board
(under
Mississippi
State
Personnel
Board)
www.mspb.ms.gov/media/34412/pscrb%20rules%20and%20regulations%20effec
tive%201.16.2015.pdf
C.
Purchasing/Lease of Commodities and Equipment: Public Procurement
Review Board (under Department of Finance and Administration)
www.dfa.state.ms.us/Purchasing/ProcurementManual/chapter6.pdf
D.
Construction Contracts: Mississippi Bureau of Buildings
www.dfa.state.ms.us/Offices/BOB/BOBProcMan.htm
Source Selection
A.
Purchase of Equipment or Commodities/Construction
Unless subject to a specific exception, all agencies and governing authorities shall
purchase their equipment; commodities and printing; contract for garbage collection or disposal;
contract for solid waste collection or disposal; contract for sewage collection or disposal;
contract for public construction; and contract for rentals as provided in §31-7-13. Generally,
those requirements are:
1.
Contracts not over $5,000.00
– No Bids Required
2.
Contracts over $5,000.00 but not over $50,000.00
– Two Quote Bids Required
– Awarding Body Must Document Best Bid (§ 31-7-13(d))
3.
Contracts over $50,000.00
– Advertise for Bids
– Award to the “Lowest and Best Bid”
– If not Awarded to Lowest Bidder Must Document Why
B.
Service Contracts
In Mississippi, service contracts are regulated by the Mississippi State Personnel Board
(MSPB). MSPB’s regulations contain the procedures for requests for proposals or bids for
Mississippi
2
service contracts. Generally, those requirements are:
1.
Contracts under $100,000.00
– Does not require approval of the Public Service Contract Review Board
– Must follow procedures for small purchases – Section 3-204 of the
Mississippi Personnel Service Contract Review Board Rules and
Regulations
2.
Contracts over $100,000.00
– Requires approval of the Mississippi Public Service Review Board
3.
Exempt Contracts
– The following contracts are exempt from the purview of the Public
Service Contract Review Board: Accountant, Dentist, Actuary, Engineer,
Architect, Physician, Attorney, Utility rate expert services, Auditor,
Veterinarian, and those contracts exempt under § 25-9-120.
IV.
Bid Protests and Contract Disputes
The Mississippi Administrative Procedures Law designates the Secretary of State’s
Office as the official registrar for the rules of all state agencies. Each state agency proposes its
own rules and regulations, seeks public comment on the proposed changes, and ultimately adopts
the final rules or regulations.
There is no uniform process for protesting a bid or conducting a contract dispute in
Mississippi. Each agency has its own rules and procedures that must be followed in order to be
heard. Lawyers must carefully read the rules and procedures for the agency they are dealing
with in order to insure that they are properly protesting a bid or disputing a decision of the
agency.
The most relevant example of an administrative procedure is the Department of Finance
and Administration’s Procurement Manual. The Procurement Manual, Chapter 6, Legal and
Contractual Remedies, outlines procedures to be followed in bid protest matters. A dispute
begins with the state agency dealing with the subject matter of the purchase. The Chief
Procurement Officer and/or head of a purchasing agency have the authority to settle and resolve
a protest/dispute. If the controversy cannot be resolved at an informal hearing by mutual
agreement, the Procurement Officer will issue a written decision that can then be
administratively appealed to the Public Procurement Review Board. The Public Procurement
Review Board will then issue a final decision. Thereafter, any person receiving an adverse
decision, the State, or both may appeal from a decision by the Public Procurement Review Board
to the designated court or courts of the State. Written decisions by the Agency Procurement
Officer and the Public Procurement Review Board are not available online, but may be obtained
directly from the Office of Purchasing and Travel and/or the Public Procurement Review Board.
Mississippi
3
A.
Bid Protests
In Mississippi, a public owner must award a construction project to the “lowest and best”
bidder. Parker v. Crawford, 68 So. 2d 281, 285 (Miss. 1953). The Mississippi Supreme Court
has long held that the lowest responsible bidder is not necessarily synonymous with lowest
bidder. M.T. Reed Construction Co. v. Jackson Municipal Airport Authority, 227 So. 2d 466
(Miss. 1969); Cooper v. Townsend, 108 So. 273 (Miss. 1926). In reviewing decisions not to
award jobs to the lowest bidder, the Mississippi courts gives the awarding body broad discretion.
Walley v. Board of Trustees of Richton Municipal School District, 241 So. 2d 644 (Miss. 1970)
(holding if discretion honestly exercised award should be upheld).
The Mississippi Code requires that an awarding body place on its minutes “detailed
calculations and [a] narrative summary showing that the accepted bid was determined to be the
lowest and best bid” should the low bid not be accepted. Miss. Code Ann. § 31-7-13(d)(i). The
Mississippi Supreme Court has held that the statutory scheme regarding bidding is not to be
taken lightly and should be followed. Richardson v. Canton Farm Equipment, 608 So. 2d 1240
(Miss. 1992).
However, any error in the bid-letting process does not automatically void the resulting
contract. Huey Stockstill, Inc. v. Hales, 730 So. 2d 539, 543 (Miss. 1998). In Hales, there were
close and possibly inappropriate ties between the awarding body and the low bidding contractor.
Id. at 541. Because of these ties, and concerns about the appearance of impropriety, the county
ultimately decided not to award the job to the lowest bidder. Id. In so doing, the county at first
failed to make a note of the reasoning in the minutes. Id. Realizing its error, the county
subsequently amended its minutes to reflect its reasoning. Id. The Mississippi Supreme Court
held that because the decision of the awarding body was not arbitrary and capricious, and the
reasoning was explained in the minutes, it was acceptable for the owner to award the contract to
the second lowest bidder.
The Court in Hales also held that the failure to initially comply with the statute was a
“technical defect” that did not void the contract. Id. at 543. When a bid defect is “technical” or
a “mere technicality” the job can still be awarded to that bidder. These defects may be waived
by the awarding body; defects creating a material change in time, price, or work may not be
waived.
Obviously, the definition of a mere technicality is all important. In defining a
“technicality” the Mississippi Supreme Court holds that if the defect effected “a material change
in time, price, or work” the defect is not a technicality. Landmark Structures, Inc. v. City
Council for the City of Meridian, 826 So. 2d 746, 747 (Miss. 2002). A defect is also not
technical if it gives the bidder a competitive advantage over other bidders. Id.
B.
Contract Disputes
How a contract claim is handled in Mississippi varies with every agency. Those dealing
with such claims have to review the procedures of the particular agency they are dealing with to
determine the procedure.
Mississippi
4
C.
Suspension and Debarment
1.
Mississippi Department of Finance and Administration
The Department of Finance and Administration has the authority to debar or suspend a
person from consideration for award of contracts. The debarment and suspension processes are
found in 6.102 of the Procurement Manual at the following website:
http://www.dfa.state.ms.us/Purchasing/ProcurementManual/chapter6.pdf.
After reasonable notice and an opportunity to be heard, a person can be debarred or
suspended for:
a.
conviction for commission of a criminal offense as an incident to
obtaining or attempting to obtain a public or private contract or
subcontract, or in the performance of such contract or subcontract;
b.
conviction under State or Federal statutes of embezzlement, theft,
forgery, bribery, falsification or destruction of records, receiving
stolen property, or any other offense indicating a lack of business
integrity or business honesty which currently, seriously, and
directly affects responsibility as a Mississippi contractor;
c.
conviction under State or Federal antitrust statutes arising out of
the submission in Mississippi of bids or proposals;
d.
violation of contract provisions, as set forth below, of a character
which is regarded by the Chief Procurement Officer or the head of
a purchasing agency to be so serious as to justify debarment action:
e.
Mississippi
i.
deliberate failure without good cause to perform in
accordance with the specifications or within the time limit
provided in the contract; or
ii.
a recent record of failure to perform or of unsatisfactory
performance in accordance with the terms of one or more
contracts; provided that failure to perform or unsatisfactory
performance caused by acts beyond the control of the
contractor shall not be considered to be a basis for
debarment;
any other cause the Chief Procurement Officer or the head of a
purchasing agency determines to be so serious and compelling as
to affect responsibility as a Mississippi contractor, including
debarment by another governmental entity for any cause listed
herein; and
5
f.
2.
violation of the ethical standards set forth in Chapter 9 (Ethics in
Public Contracting).
Mississippi Board of Contractors
Contractors working in Mississippi are regulated by the Mississippi Board of Contractors.
The statutes governing the Mississippi Board of Contractors is found at Miss. Code Ann. 31-3-1,
et. seq. The Board of Contractors further regulates commercial construction pursuant to its
internal regulations that can be found at:
http://www.msboc.us/wp-content/uploads/2015/10/COMMERCIAL-LAWS-AND-RULESREVISED-2015.pdf.
Residential contractors are regulated under a separate set of rules that can be found at:
http://www.msboc.us/wp-content/uploads/2015/10/RESIDENTIAL-LAWS-AND-RULESREVISED-2015.pdf.
The Board of Contractors has broad authority in Mississippi to regulate contractors and
can, after a hearing, revoke a contractor’s certificate of responsibility. Under the regulations set
forth above, the Board has the authority to hear all complaints, issue monetary fines, suspend
licenses, and revoke licenses.
V.
Judicial Review
A.
Appeals from Decisions of Counties and Municipalities
Appeals from a judgment or decision of a county or municipality are governed by § 1151-75 of the Mississippi Code. A person aggrieved by a judgment or decision of a board of
supervisors or a municipal authority may appeal within ten days from the date of adjournment at
which session the board of supervisors or municipal authorities rendered the judgment or
decision being appealed.
B.
Appeal from Decision of Agency
There is no uniform statutory procedure for appealing the decision of an administrative
body in Mississippi. There are statutory procedures, like the one for counties and cities set forth
above, and there is a catch-all process for agencies that do not have their own procedure. It is
important that anyone aggrieved by the decision of an administrative body research the
Mississippi Code to determine if there is a statutory process for appeal.
There is no statue governing an appeal from the Mississippi Department of Finance and
Administration. Therefore, in regard to procurement, it is likely that the catch-all process
applies.
Where no right to appeal exists in the relevant statutes, limited judicial review via writ of
Mississippi
6
certiori is available. Gill v. Mississippi Department of Wildlife Conservation, 574 So. 2d 586
(Miss. 1991). However, the appeal must be from a decision that was judicial or quasi-judicial in
nature. Mississippi Transportation Commission v. Engineering Associates, 39 So. 3d 1 (Miss.
2010). Pursuant to Uniform Circuit and County Court Rule 5.04, a Notice of Appeal must be
filed within 30 days of the entry of the order or judgment being appealed.
When handling an appeal from an administrative agency a court will only entertain an
appeal to determine if the order or judgment of the lower authority:
1) was supported by substantial evidence;
2) was arbitrary or capricious;
3) was beyond the power of the lower authority to make; or
4) violated some statutory or constitutional right of the complaining party.
Uniform Circuit and County Court Rule 5.03.
VI.
Extent of State’s Adaptation or Application of ABA Model Procurement Code
Mississippi has not adopted the ABA Model Procurement Code.
Mississippi
7
Virginia Procurement Rules and Regulations
Prepared by John S. Pachter, Edmund M. Amorosi, and Laura Semple
Smith Pachter McWhorter PLC
Email: [email protected], [email protected],
and [email protected]
I.
Statutory Reference
A.
Procurement/Purchasing Statutes
Adopted in 1982, the Virginia Public Procurement Act (“VPPA”) is codified at §§ 2.24300 et seq. A table of contents follows:
Article 1.
General Provisions
2.2-4300.
2.2-4301.
2.2-4302.
2.2-4302.1.
2.2-4302.2.
Short title; purpose; declaration of intent.
Definitions.
Implementation.
Process for competitive sealed bidding.
Process for competitive negotiation.
Article 2.
Contract Formation and Administration.
2.2-4303.
2.2-4303.1.
2.2-4303.2 .
2.2-4304.
2.2-4305.
2.2-4306.
2.2-4307.
2.2-4308.
2.2-4308.1.
2.2-4308.2.
2.2-4309.
2.2-4310.
2.2-4311.
2.2-4311.1.
2.2-4311.2.
2.2-4312.
2.2-4313.
2.2-4314.
Virginia
Methods of procurement.
Architectural and professional engineering term contracting; limitations.
Job order contracting; limitations.
Joint and cooperative procurement.
Competitive procurement by localities on state-aid projects.
Design-build or construction management contracts for
Commonwealth authorized.
Fixed-price or not-to-exceed-price design-build and construction management contracts for
juvenile correctional facilities authorized.
Design-build or construction management contracts for public bodies other than the
Commonwealth; eligibility requirements; award of contract; records to be kept.
Purchase of owner-controlled insurance in construction projects.
Registration and use of federal employment eligibility verification program required; debarment.
Modification of the contract.
Discrimination prohibited; participation of small, women-, minority- and service disabled veteranowned business.
Employment discrimination by contractor prohibited; required contract provisions.
Compliance with federal, state, and local laws and federal immigration law; required contract
provisions.
Compliance with state law; foreign and domestic businesses authorized to transact business in the
Commonwealth.
Drug-free workplace to be maintained by contractor; required contract provisions.
Petition for recycled goods and products; periodic review of procurement standards.
Petition for procurement of less toxic goods and products; periodic review of procurement
1
2.2-4315.
2.2-4316.
2.2-4317.
2.2-4318.
2.2-4319.
2.2-4320.
2.2-4321.
2.2-4321.1.
2.2-4321.2.
2.2-4322.
2.2-4323.
2.2-4324.
2.2-4325.
2.2-4326.
2.2-4327.
2.2-4328.
2.2-4329.1
2.2-4330.
2.2-4331.
2.2-4332.
2.2-4333.
2.2-4334.
2.2-4335.
2.2-4336.
2.2-4337.
2.2-4338.
2.2-4339.
2.2-4340.
2.2-4341.
2.2-4342.
standards.
Use of brand names.
Comments concerning specifications.
Prequalification generally; prequalification for construction
Negotiation with lowest responsible bidder.
Cancellation, rejection of bids; waiver of informalities.
Exclusion of insurance bids prohibited.
Debarment.
Prohibited contracts; exceptions; determination by Department of Taxation; appeal; remedies.
Public works contract requirements.
Acceptance of bids submitted to the Department of Transportation.
Purchase programs for recycled goods; agency responsibilities.
Preference for Virginia products with recycled content and for Virginia firms.
Preference for Virginia coal used in state facilities.
Preference for recycled paper and paper products used by state agencies.
Preference for community reinvestment activities in contracts for investment of funds.
Preference for local products and firms; applicability.
Energy forward pricing mechanisms.
Withdrawal of bid due to error.
Contract pricing arrangements.
Workers' compensation requirements for construction contractors and subcontractors.
Retainage on construction contracts.
Deposit of certain retained funds on certain contracts with local governments; penalty for failure to
timely complete.
Public construction contract provisions barring damages for unreasonable delays declared void.
Bid bonds.
Performance and payment bonds.
Alternative forms of security.
Bonds on other than construction contracts.
Action on performance bond.
Actions on payment bonds; waiver of right to sue.
Public inspection of certain records.
Article 3.
Exemptions and Limitations.
2.2-4343.
2.2-4343.1.
2.2-4344.
2.2-4345.
2.2-4346.
Exemption from operation of chapter for certain transactions.
Permitted contracts with certain religious organizations; purpose; limitations.
Exemptions from competition for certain transactions.
Exemptions from competitive sealed bidding and competitive negotiation for certain transactions;
limitations.
Other exemptions for certain transactions.
Article 4.
Prompt Payment.
2.2-4347.
2.2-4348.
2.2-4349.
2.2-4350.
2.2-4350.1.
2.2-4351.
2.2-4352.
2.2-4353.
Virginia
Definitions.
Exemptions.
Retainage to remain valid.
Prompt payment of bills by state agencies.
Prohibition on payment without an appropriation; prohibition on IOUs.
Defect or impropriety in the invoice or goods and/or services received.
Prompt payment of bills by localities.
Date of postmark deemed to be date payment is made.
2
2.2-4354.
2.2-4355.
2.2-4356.
Payment clauses to be included in contracts.
Interest penalty; exceptions.
Comptroller to file annual report.
Article 5.
Remedies.
2.2-4357.
2.2-4358.
2.2-4359.
2.2-4360.
2.2-4361.
2.2-4362.
2.2-4363.
2.2-4364.
2.2-4365.
2.2-4366.
Ineligibility.
Appeal of denial of withdrawal of bid.
Determination of nonresponsibility.
Protest of award or decision to award.
Effect of appeal upon contract.
Stay of award during protest.
Contractual disputes.
Legal actions.
Administrative appeals procedure.
Alternative dispute resolution.
Article 6.
Ethics in Public Contracting.
2.2-4367.
2.2-4368.
2.2-4369.
2.2-4370.
2.2-4371.
2.2-4372.
2.2-4373.
2.2-4374.
2.2-4375.
2.2-4376.
2.2-4376.1.
2.2-4377.
Purpose.
Definitions.
Proscribed participation by public employees in procurement transactions.
Disclosure of subsequent employment.
Prohibition on solicitation or acceptance of gifts; gifts by bidders, offerors, contractor or
subcontractors prohibited.
Kickbacks.
Participation in bid preparation; limitation on submitting bid for same procurement.
Purchase of building materials, etc., from architect or engineer prohibited.
Certification of compliance required; penalty for false statements.
Misrepresentations prohibited.
Contributions and gifts; prohibition during procurement process.
Penalty for violation.
Virginia’s primary purchasing department, the Department of General Services’ (“DGS”)
Division of Purchases and Supply (“DPS”), has additional procurement-related information at its
website at http://dgs.virginia.gov/DivisionofPurchasesandSupply/DPS/tabid/418/Default.aspx
B.
Other Applicable Statutes
Statutes relating to lobbying rules and registration requirements are available at Virginia
Code §§ 2.2-418 et seq. Virginia’s Ethics in Public Contracting standards relating to
procurement integrity are set forth in the VPPA §§ 2.2-4367 et seq. Other Virginia statutes
related to procurement integrity include: (1) the State and Local Government Conflict of
Interests Act (§§ 2.2-3100 et seq.); (2) the Virginia Governmental Frauds Act (§§ 18.2-498.1 et
seq.); and (3) statutes related to bribery (§§ 18.2-438 and 18.2-446 et seq.). Contractors who
defraud the Commonwealth are subject to penalties for violations of law, including under the
Virginia Fraud Against Taxpayers Act, § 8.01-216.1 et seq., Virginia’s equivalent to the federal
False Claims Act. The Virginia Freedom to Information Act, codified at § 2.2-3700 et seq. of
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3
the Virginia Code, permits access to public records of public agencies, subject to certain
exceptions.
II.
Regulations
Virginia has promulgated an Agency Procurement and Surplus Property Manual
(“APSPM”) to establish the rules and regulations for procurement. The regulations cover a wide
range of topics, including competitive sealed bidding, competitive negotiation, sole source
procurement, contract administration, and appeals and disputes. The APSPM regulations can be
found at https://eva.virginia.gov/pages/eva-aspm-manual.htm. .
Virginia
also
has
published
a
Vendor’s
Manual,
available
athttps://eva.virginia.gov/pages/eva-vendors-manual.htm, to guide vendors seeking to do
business with the Commonwealth. The Vendor’s Manual, which is maintained by the DGS’
DPS, provides information about agency purchases of non-technology goods and nonprofessional services. Guidance for information technology procurements is available at the
Virginia Information Technologies Agency website, http://www.vita.virginia.gov/. The DGS’
Division of Engineering and Buildings maintains information about the procurement of
construction and professional services for the Commonwealth, available at:
http://www.dgs.virginia.gov/DivisionofEngineeringandBuildings/BCOM/CPSM/2004CPSMRev
1/tabid/403/Default.aspx.
III.
Source Selection
A.
Competitive Sealed Bidding
Competitive sealed bidding is the preferred method for acquiring goods, nonprofessional
services, insurance, and construction for public use when the cost is expected to exceed
$100,000. Virginia Code §§ 2.2-4303(A), (D), and (G). Further details about this procurement
method are available at Chapter 6 of the APSPM.
B.
Competitive Negotiation
The VPPA requires the use of competitive negotiation for the procurement of all
professional services. This method may also be used for goods and professional services when it
is not practically or fiscally advantageous to use competitive sealed bidding, as provided for in
the Virginia Code §§ 2.2-4301 and 2.2-4303(c). Further details about this procurement method
are outlined in Chapter 7 of the APSPM. See also Professional Services, section D below.
C.
Sole Source Procurement
A sole source procurement is authorized when there is only one source practicably
available for the goods or services requested. Virginia Code § 2.2-4303(E). All sole source
procurements in excess of $50,000 must be approved by the agency head. More information is
available at Chapter 8 of the APSPM.
Virginia
4
D.
Professional Services
Because they are services and not goods, the procurement of professional services is not
handled by DPS. In large part, these service contracts are procured by the DGS’ Division of
Engineering and Building for construction and building-related projects (architects, engineers)
and other agencies on an as needed basis. The regulations require that competitive negotiation
be used for the procurement of professional services, unless the services provided are less than
$50,000. Virginia Code § 2.2-4303(B). Professional services include work performed by an
independent contractor in the practice of accounting, actuarial services, architecture, land
surveying, landscape architecture, law, dentistry, medicine, optometry, pharmacy, and
professional engineering. See APSPM, Chapter 4, § 4.23 for further details. Architectural and
professional engineering contracts for multiple projects are subject to additional terms and
limitations. Virginia Code, § 4303.1.
E.
Construction Services
Procurement of construction for “Capital Outlay Projects” is governed by the rules of the
Construction and Professional Services Manual, issued by the DGS’ Division of Engineering and
Buildings. See Virginia Code, § 2.2-1132. Construction may be procured only by sealed
competitive bidding, except in the limited instances describe in the next section. Virginia Code,
§ 2.2-4303(D).
F.
Design-Build/Construction Management
Unlike many states that prohibit design-build in public contracts, Virginia allows their
use albeit with heavy restrictions and special procedures. The VPPA grants authority to “any
public body, other than the Commonwealth,” to enter into a contract for “construction on a fixedprice or not-to-exceed price design-build or construction management basis” if the public agency
obtains the approval of the Design-Build/Construction Management Review Board (“Review
Board”). Virginia Code § 2.2-4308. The Review Board procedures are extensive and approval
has historically been difficult to obtain. A careful review of the requirements is recommended.
The statute notes that “the competitive sealed bid process remains the preferred method of
construction procurement for public bodies in the Commonwealth.” Id.
Although design-build projects are generally not favored, an enactment of the General
Assembly permits the use of design-build in certain contexts under the Public-Private Education
Facilities and Infrastructure Act of 2002 (“PPEA”). and (2) the Public-Private Transportation Act
of 1995 (“PPTA”). The PPEA authorizes a public entity to enter into a comprehensive
agreement with a private operator to develop a qualifying project. Virginia Code § 56-575.1 et
seq. A qualifying project is: (1) an education facility; (2) a building or facility for principal use
by a public agency; (3) any improvement or equipment needed to enhance the public safety and
security of a building used by a public entity; (4) utility and telecommunications infrastructure;
(5) a recreational facility; (6) technology infrastructure, services, and applications; (7) any
service designed to increase productivity or efficiency of a public entity; (8) any technology,
equipment, or infrastructure to provide wireless broadband services to schools, businesses, or
residential areas; (9) improvements to unimproved state or local real estate; or (10) any solid
Virginia
5
waste management facility. Id. Notably, PPEA is exempt from the VPPA’s stringent Review
Board requirements. Despite this exemption, the public agency must still follow procedures that
are (1) consistent with procedures for competitive sealed bidding or (2) consistent with
competitive negotiation. Virginia Code § 56-575.16. Use of the latter procedure requires
approval by the Governor or department Secretary. Id. The PPTA was enacted to spur
innovative solutions to Virginia’s transportation and traffic problems in a more timely and less
costly fashion. Va. Code § 33.2-1800 et seq. Like PPEA, PPTA is exempt from the VPPA’s
rigorous Review Board requirements.
IV.
Bid Protests and Contract Disputes
A.
Bid Protests
Any bidder or offeror may protest. Potential bidders or offerors may protest sole source
or emergency contracts only. Virginia Code § 2.2-4360. The protest must be filed no later than
ten days after public notice of the award or announcement of the decision to award, whichever
occurs first. If a protest depends in whole or in part on information contained in public
procurement records subject to inspection, the protest time expires ten days after those records
are available for inspection. Id.
The following protest grounds will not be considered: (1) An allegation that the selected
awardee is not a responsible bidder or offeror; (2) A challenge to the validity of the terms or
conditions of the Invitation to Bid or Request for Proposal. Id. The protest must contain the
basis for the protest and the relief sought. Id.
In response to the protest, the agency must issue a decision in writing within ten days
stating reasons. Id. The decision is final unless the protester appeals within ten days of receipt
by filing an administrative appeal or instituting legal action. Id. See also Virginia Code §§ 2.24364 and 2.2-4365. Pursuant to Virginia Code 2.2-4360(b), if the agency determines before
award that the selection decision was arbitrary or capricious, the public body shall cancel the
proposed award or revise it to comply with the law. If award has been made but performance
has not begun, the performance of the contract may be enjoined. Where performance has begun,
the public body may declare the contract void on finding it is in the best interest of the public.
The contractor shall be compensated for its cost of performance but will not be entitled to lost
profits. Note: the prohibition against injunction after performance has begun does not apply to a
circuit court's exercise of equitable powers on appeal of a protest decision. MFS Network
Technologies v. Commonwealth, 33 Va. Cir. 406 (City of Richmond 1994).
Pending final determination of protest or appeal, the validity of a contract awarded and
accepted in good faith shall not be affected. Virginia Code § 2.2-4361. Contract award need not
be delayed for the time allowed for protest, but in the event of timely protest or legal action, no
further action to award the contract will be taken without written determination that it is
necessary to protect the public interest or unless the bid or offer would expire. Virginia Code §
2.2-4362.
A disappointed bidder, or a bidder denied withdrawal of a bid, may bring legal action in
Virginia
6
the appropriate circuit court instead of an administrative appeal. Virginia Code §§ 2.2-4360 and
2.2-4364. While the protester need not resort to administrative appeal remedies, those
procedures, once invoked, shall be exhausted before instituting legal action unless the public
body agrees otherwise. Virginia Code § 2.2-4364(F).
B.
Bid Protest Appeals
Pursuant to Virginia Code § 2.2-4365, a public body may establish administrative
procedures for hearing protests of awards, appeals from refusals to allow withdrawal of bids,
appeals from disqualifications and determinations of nonresponsibility, and appeals of contract
disputes during performance. Procedures shall provide for a hearing before a disinterested
person or panel, an opportunity to present information and issuance of a written decision
containing findings of fact. See W.M. Schlosser Co., Inc. v. Board of Supervisors of Fairfax
County, 245 Va. 451 (Va. 1993) (county employee is not a disinterested person). The findings of
fact shall be final and conclusive unless: (1) fraudulent, arbitrary or capricious; (2) so grossly
erroneous as to imply bad faith; or (3) in the case of denial of prequalification, not based on
proper criteria. No determination on an issue of law shall be final if timely legal action is
instituted. The DGS/DPS Procurement Appeals Board provides an impartial review of any
Virginia agency’s procurement of goods. Virginia Code § 2.2-4365; APSPM, Chapter 11, §
11.2. Appeals relating to service contracts may be handled by certain agencies, provided the
Schlosser criteria are met.
C.
Contract Disputes
1.
Contract Claims
A contract claim must be filed in writing with the agency within sixty days after final
payment to be timely. Virginia Code § 2.2-4363. Written notice of such claim must be given at
the time of the occurrence upon which the claim is based. Time frames in which the agency
must render a decision on a claim may vary by contract. Id. In the case where no timeframe is
specified, the claimant may pursue legal action in circuit court after a period of ninety days of the
submission of the claim if no decision is rendered before then. Id. An agency’s failure to render
a decision within ninety days or such other time as may be provided by contract shall be
considered a deemed denial. Id. A contractor may bring an action involving a contract dispute
with a public body in the appropriate circuit court. Id. See also XL Specialty Ins. Co. v.
Commonwealth, 47 Va. App. 424 (2006) (sovereign immunity only waived for those entities in
privity of contract with Virginia, i.e. contractors and not sureties).
2.
Contract Claims Appeals
A contractor may appeal the agency’s decision on a contract claim by using the agency’s
administrative procedures if available, or by appealing directly to the circuit court having
jurisdiction. Virginia Code §§ 2.2-4363, 2.2-4364 and 2.2-4365. An agency may establish an
administrative procedure for hearing “appeals from decisions on disputes arising during
performance of a contract.” Virginia Code § 2.2-4365.
Virginia
7
Appeals of agency decisions are to the circuit courts. Id. See also Viking Enter. v.
County of Chesterfield, 277 Va. 104 (2009) (procedural requirements for filing suit against
counties and other entities that can be harmonized with the VPPA remain in effect for such
appeals). An appeal of the circuit court’s decision shall be to the Supreme Court and not the
Court of Appeals. Allstar Towing, Inc. v. City of Alexandria, 231 Va. 421 (1986).
Note: The VPPA encourages the use of ADR to resolve contract disputes. Virginia Code
§ 2.2-4366. Contractors entering into the ADR process must also meet any deadlines relating to
a formal claim submission. However, the results of ADR procedures such as arbitration are not
binding on the Commonwealth. Id.
D.
Suspension and Debarment
Virginia’s debarment statute permits the exclusion of prospective contractors from
contracting for particular types of supplies, services, insurance, or construction for defined
periods of time. Virginia Code § 2.2-4321. The agency must have written debarment procedures
in place. Id. A debarment action may be based on a contractor’s unsatisfactory performance for
a public body. Id.
V.
Administrative and Judicial Review
A.
Administrative Review
The procuring agency may provide an “administrative procedure for hearing (i) protests
of a decision to award or an award, (ii) appeals from refusals to allow withdrawal of bids, (iii)
appeals from disqualifications and determinations of nonresponsibility, and (iv) appeals from
decisions on disputes arising during the performance of a contract, or (v) any of these.” Virginia
Code § 2.2-4365. Beyond this agency review and the review of goods procurements by
DGS/DPS, there are no other entities, such as a board of contract appeals, that offer further
administrative relief or publish procurement decisions.
B.
Judicial Review
Any party, including the public body, may institute judicial review within thirty days of
receipt of the written agency decision. Virginia Code § 2.2-4365(B). Petitioner must establish
that the agency’s decision was not (i) an honest exercise of discretion, but rather was arbitrary or
capricious or (ii) not in accordance with the Constitution of Virginia, applicable state law or
regulation, or the terms or conditions of the solicitation. Virginia Code § 2.2-4364(A). In the
case of denial of prequalification, petitioner must show the decision was not based on applicable
criteria. If the court reverses a finding that the apparent low bidder was nonresponsible, the court
may direct the public body to award the contract to that bidder. Id.
If injunctive relief is granted, the court, on request of the public body, shall require the
posting of reasonable security to protect the public body. Virginia Code § 2.2-4364(D). As
stated above, a contractor has the right to appeal an agency’s decision on a claim to the
appropriate circuit court.
Virginia
8
A contractor may appeal the circuit court’s decision to the Virginia Supreme Court, and
not the intermediate Court of Appeals. Opinions from the Supreme Court are available at this
website: http://www.courts.state.va.us/scndex.htm.
VI.
Extent of State’s Adoption or Adaptation of ABA Model Procurement Code
The Virginia Public Procurement Act, originally adopted in 1982, is based on the
American Bar Association's (ABA) 1980 version of the Model Procurement Code for State and
Local Government. VIRGINIA PROCUREMENT LAW STUDY ADVISORY COMMITTEE, OFFICE OF THE
SECRETARY OF ADMINISTRATION AND FINANCE, VIRGINIA PROCUREMENT LAW STUDY FINAL
REPORT 13 (1980) (“In developing the proposed legislation, the Advisory Committee relied
heavily upon the Model Procurement Code published by the American Bar Association.”).
Maria J. K. Everett, SPECIAL JOINT GENERAL LAWS SUBCOMITTEE STUDYING THE VIRGINIA
PUBLIC PROCUREMENT ACT, OVERVIEW OF THE VIRGINIA PUBLIC PROCUREMENT ACT 4 (2013)
(“The VPPA is based on the American Bar Association’s Model Procurement Code.”).
Virginia
9
Puerto Rico Procurement Rules and Regulations
Prepared by María C. Cartagena- Cancel
McConnell-Valdés LLC
E-mail: [email protected]
With editorial assitance from Raúl M. Arias- Marxuach
McConnell-Valdés LLC
E-mail: [email protected]
I.
Statutory Reference
A.
Procurement/Purchasing Statutes
Enabling statutes authorize agencies in Puerto Rico to enter into agreements and contracts
through competing bidding, or similar processes, for the acquisition of goods and services
necessary to carry out their delegated duties. Each agency adopts its own procurement
regulations. The term “agency” encompasses the majority of the government, except the
legislative and judiciary branches and other entities excluded from the definition set forth in the
Uniform Administrative Act. See 3 P.R. Laws Ann. § 2102 (a).
Puerto Rico’s judicial and legislative branches are responsible for their own procurement
processes. Accordingly, the Office of Courts Administration has powers to acquire goods and
services. See 4 P.R. Laws Ann § 24n. To that end, the judicial branch adopts its own bids and
procurement regulation. Similarly, the Legislative Assembly is responsible for its procurement
processes and has promulgated regulations for the administration of the Legislative Branch and
its dependencies. See 2 P.R. Laws Ann. §553.
As to municipalities, Act No. 199 of September 6, 1996, 21 P.R. Laws Ann. § 4001 et
seq. known as the Autonomous Municipalities Act, authorizes them to acquire whatever
equipment is necessary for the preparation and operation of any public work or facility, and to
contract professional, technical and consulting services that may be necessary to carry out the
activities, programs and operations of the municipality. See 21 P.R. Laws Ann. §4005.
1.
State Government Procurement
Although Puerto Rico agencies are empowered to acquire goods and services, the
General Administration Service (the “Administration”) was created for the purpose of offering
auxiliary services to different government agencies. See 3 P.R. Laws Ann. §§ 931 et. seq. The
Administration provides to the agencies, departments, and instrumentalities of the Executive
Branch, the means of acquiring supplies and nonprofessional services. Among other supplies, the
Administration acquires directly through purchase or lease or other means permissible under the
laws of the Commonwealth of Puerto Rico, all motor vehicles for the Executive Branch.
On September 15, 2015, Puerto Rico Legislature passed Act No. 153 with the purpose of
adopting uniformed standards of evaluation, adjudication and review of procurement of goods
and services by the agencies. Further Act No. 153 intends to centralize government procurement
Puerto Rico
1
of certain goods and services to achieve cost savings through economies of scale. It creates a
Technical Advice Committee and a Bids Review Board attached to the Administration.
B.
Other Applicable Statutes
1.
Ethics Laws
Contractors, government employees and, officers are subject to their respective code of
ethics.
a.
Contractor’s Code of Ethics
On June 18, 2002, the Legislature of Puerto Rico promulgated Act No. 84, known as the
Code of Ethics for Contractors, Suppliers and Applicants for Economic Incentives of the
Executive Agencies of the Commonwealth of Puerto Rico (“Contractor’s Code of Ethics”). See
3 P.R. Laws Ann. §§ 1755 et seq. The Contractor’s Code of Ethics regulates the conduct of
contractors and suppliers of goods or services with the executive agencies of the Commonwealth
of Puerto Rico, as well as that of the members of the entities that receive some sort of economic
incentive from the government.
Ethical obligations and responsibilities of government contractors include, among others:
(1) Disclose all the information needed for the executive agencies to evaluate the
transaction in detail, and make correct and informed decisions.
(2) Submit quotes on a basis of fair price of services, considering experience, academic
studies, and technical skills.
(3) Perform work within the established term, guarantee the quality of the services and
goods furnished, and charge the services upon presentation of an invoice, whose correction must
be certified.
(4) Refrain from offering or delivering to the public servant of the executive agencies
with which he/she wishes to establish or has established a contractual relationship goods of
monetary value, contributions, gifts, gratuities, favors, services, donations, loans or shares in any
commercial entity or juridical business.
(5) Collaborate with any investigation initiated by the government on business
transactions, execution of contracts, or granting of government incentives in which he/she was a
party thereto or that directly or indirectly benefited from it.
(6) Refrain from using confidential information acquired in the course or as result of any
negotiation that has been entrusted to him/her through a contract by the Commonwealth of
Puerto Rico.
In addition to the above, a contractor cannot accept or maintain contractual or business
relations with a public servant or a member of his/her family unit that has the effect of impairing
the independent criteria of the public official or employee in the performance of his/her official
duties. Further, a person who has actively participated in political campaigns cannot establish
Puerto Rico
2
negotiations with the secretaries, heads of agencies, municipal executives or executive directors
of public corporations leading to the improper granting of advantages, privileges or favors for
their benefit, or of any other person, represented by the former.
The Contractor’s Code of Ethics also prohibits contractors to accept or maintain
contractual or business relations with former public servants during a term of one year counting
from the time they have ceased to hold office, if in the performance of their government duties
they participated directly in transactions between the executive agencies and the person.
The acceptance of the norms established in the Code of Ethics by persons interested in
doing business with the government is an essential condition so that they may execute
transactions or enter into agreements with the executive agencies. Said fact shall be stated in
every contract between the executive agencies and contractors or suppliers of services, and in all
applications for economic incentives provided by the Government.
b.
Code of Ethics for the Executive, Legislative and Judicial
Branches; Restrictions on Former Public Servants
The Code of Ethics for the Executive, Legislative and Judicial Branches, was enacted on
July 24, 1985 (“Code of Ethics”) to regulate the conduct of officials and employees of the
Executive Branch of the Commonwealth of Puerto Rico, including its public corporations and
those agencies that are in control of said Branch, its municipalities, corporations and municipal
consortia. In addition, the Code establishes certain restrictions on the actions of former public
servants of the Executive, Legislative and Judicial Branches. See 3 P.R. Laws Ann. 3 L.P.R.A.
§§ 1821, et seq.
The Code of Ethics contains the following prohibitions related to government
procurement. A public officer or employee cannot:
(1) Use the duties and powers of his office, or public property or funds directly or
indirectly, to obtain advantages, benefits or privileges not permitted by law, for himself, any
member of his family unit, or for any other person, business or entity.
(2) Request or accept any asset of monetary value as payment for carrying out the duties
and responsibilities of his employment.
(3) Accept or solicit from any person, directly or indirectly, either for himself, for any
member of his family unit or for any other person, business or entity, any asset of monetary
value.
(4) Reveal or use confidential information acquired as a result of his employment, to
obtain, directly or indirectly, any economic advantage or benefit for him, a member of his family
unit or for any other person, business or entity.
(5) Appoint or promote to a position as a public official or employee or to contract
business or entity with an interest in the executive agency in which the latter works or has the
power to decide or influence, to any person who is a relative of said public official or employee
within the fourth degree of consanguinity or the second degree of affinity.
Puerto Rico
3
c.
Prohibition Against Granting Bids or Contracts to Persons
that Have Been Convicted of Certain Crimes
On December 29, 2000, Puerto Rico passed Act 458. See 3 P.R. Laws Ann., §§ 928-928i
(“Act 458”). The statute prohibits a government official from awarding contracts to any natural
or juridical person who has been convicted of a crime constituting fraud, embezzlement, or the
misappropriation of public funds. The statute provides for the rescission of any government
contract entered into with a party convicted of a specified offense, and provides that all
government contracts are deemed to include a term authorizing rescission if the counterparty is
convicted of a specified offense.
Act 458 states that a conviction or guilty plea for any of the crimes listed in entails the
automatic rescission of all contracts in effect on said date between the person convicted or found
guilty. In addition, the Government has the right to demand reimbursement of payments made
with regard to the contract or contracts directly affected by the commission of the crime.
2.
Contracts Registry
Government and municipal entities must keep a registry of all contracts executed,
including amendments thereto, and must remit a copy of the contract to the Office of the
Comptroller within fifteen days following the date of the execution. If the contract is executed
outside Puerto Rico, this period is extended to thirty days. See 2 P.R. Laws Ann. § 97.
It is not necessary to submit to the Comptroller a copy of the following contracts:
(1) Personal services of a sporadic nature for a non-extendible term of less than six
months, and at a cost of less than two thousand dollars;
(2) Personal services of a professional nature for a non-extendible term of one year or
less, and whose services do not constitute a position or employment and its cost does not exceed
five thousand dollars;
(3) For works at a cost not to exceed two thousand dollars;
(4) Those executed through public auctions, excepting those that are connected to
construction projects or works;
(5) Professional services with physicians and health professionals executed with
government entities whose main objective is to provide medical services;
(6) Any other type of contract that the Comptroller may, by regulations to that effect,
determine not to be sent to him/her.
Noncompliance with these requisites does not in itself be cause for declaring a legally
valid contract or juridical business null. However, the Law provides that no provision or
consideration of services object of a contract may be demanded until this requisite is satisfied.
Puerto Rico
4
Every contract subject to registration shall contain a clear and conspicuous notice that
shall read as follows: 'No provision or consideration of services object of this contract may be
demanded until the same has been filed for registration with the Office of the Comptroller
pursuant to the provisions of Act No. 18 of October 30, 1975, as amended [§§ 97 and 98 of this
title]'.
C.
Opinions of the Office of the Attorney General
By statute, the Secretary of Justice provides written opinions to the executive as well as
to the legislature, whenever it is requested, on any issue of law regarding their respective
positions. See 3 P.R. Laws Ann. § 71.
Opinions by Secretary of Justice can be found at the Puerto Rico Department of Justice
Website located at: http://www.justicia1.pr.gov/ordenesa/opiniones.aspx
II.
Regulations
The Spanish text of Puerto Rico procurement regulations can be found at:
http://www.estado.gobierno.pr/
Bids processes are informal and its regulations and terms are established by the agencies,
i.e. each agency has its own set of rules. See 3 P.R. Laws Ann. §2169. Consequently, there is a
considerable number of regulations. Below is a listing of Puerto Rico procurement regulations
promulgated by the main government entities:
Agency/ Government Entity/Public Corporation
Regulation Number
General Administration Services
P.R. Regs. ASG REG. 1672
P.R. Regs. ASG REG. 3381
P.R. Regs. ASG REG. 4043
P.R. Regs. ASG REG. 4042
P.R. Regs. ASG REG. 5132
P.R. Regs. ASG REG. 6526
P.R. Regs. ASG REG. 3569
P.R. Regs. ASG REG. 6177
P.R. Regs. ASG REG. 0865
P.R. Regs. ASG REG. 3125
Health Insurance Administration
P.R. Regs. ASES REG. 5256
P.R. Regs. ASES REG. 7636
Medical Service Administration
P.R. Regs. ASEM REG. 5261
P.R. Regs. ASEM REG. 4170
Aqueducts and Sewers Authority
P.R. Regs. AAA REG. 2732
P.R. Regs. AAA REG. 5319
P.R. Regs. AAA REG. 5016
Puerto Rico
5
Agency/ Government Entity/Public Corporation
Regulation Number
Public-Private Partnerships Authority
P.R. Regs. AAPP REG. 7853
Roads and Transportation Authority
P.R. Regs. ACT REG. 5263
P.R. Regs. ACT REG. 4500
Public Buildings Authority
P.R. Regs. AEP REG. 7812
P.R. Regs. AEP REG. 8511
Puerto Rico Power Electric Authority
P.R. Regs. AEE REG. 8518
Ports Authority
P.R. Regs. AP REG. 7476
Lands Authority
P.R. Regs. ATPR REG. 5656
Authority for the Financing of the Infrastructure of
Puerto Rico
P.R. Regs. AFI REG. 5853
Puerto Rico Economic Development Bank
.P.R. Regs. BDE REG. 7395
Tourism Company
P.R. Regs. TURISMO REG. 7598
P. R. Regs. TURISMO REG. 8331
Department of Agriculture
P.R. Regs. DA REG. 6632
Department of Education
P.R. Regs. DE REG. 7040
P.R. Regs. DE REG. 7545
P.R. Regs. DE REG. 7283
P.R. Regs. DE REG. 7934
Treasury Department
P.R. Regs. HACIENDA REG. 6514
P.R. Regs. HACIENDA REG. 6796
Department of Justice
P.R. Regs. JUSTICIA REG. 3661
P.R. Regs. JUSTICIA REG. 4174
Department of Family Affairs
P.R. Regs. FAMILIA REG. 5450
P.R. Regs. FAMILIA REG. 7757
Department of Housing
P.R. Regs. VIVIENDA REG. 6793
Puerto Rico
6
Agency/ Government Entity/Public Corporation
Regulation Number
P.R. Regs. SALUD REG. 6062
P.R. Regs. SALUD REG. 6584
P.R. Regs. SALUD REG. 5363
Department of Health
Department of Transportation
P.R. Regs. DTOP REG. 4764
P.R. Regs. DTOP REG. 5393
P.R. Regs. DTOP REG. 4830
Office of Courts Administration
P.R. Regs. SUPREMO REG. TRIB 6
P.R. Regs. OAT OAT-8
P.R. Regs. OAT OAT-10
P.R. Regs. OAT OAT-19
P.R. Regs. OAT OAT-20
Puerto Rico Office of the Commissioner for Municipal
Affairs
III.
P.R. Regs. OCAM REG. 7539
Source Selection
The invitation to bid could be in the form of formal auction, request for proposals (RFP)
or, a hybrid process between formal bid and RFP.
A.
Traditional Bid Process
1.
Invitation to Bid
The invitation provides general information about bid’s process. Typically, the
invitation includes:
a.
b.
c.
d.
e.
f.
g.
h.
i.
where and when (time and date) bids must be delivered;
maximum time for bid acceptance;
number of copies of the bid required;
how the bid envelope should be marked;
notice that bid must include a non-collusion form, tax compliance
certificate
a pricing sheet, and reference form;
a requirement that the bid be signed by authorized individual;
bonding requirements (performance or payment bonds), if any;
the amount of bid deposit, if any
The agency’s regulation may allow bidders to amend the offers prior to the opening of
the tendered bids. In such cases, the amendment must be submitted in writing, no later than the
due date established by the agency to submit offers.
2.
Puerto Rico
Presentation of the offer
7
The offer may be withdrawn prior to the opening of the tendered bids. The envelopes are
opened in public at the date and time advised in the invitation. Each bidder is entitled to examine
the bids of its competitors. A bid which contains material variations from the government’s
specifications or that fails to include any required documentation could be rejected at this stage.
3.
Evaluation and Adjudication
The agency’s auction board or a designated committee shall make an award to the lowest
responsive bidder taking into consideration that the bid conform to specifications, delivery terms,
the ability of the bidder to fulfill and comply with the contract, financial responsibility of the
bidder, business standing and integrity, and other conditions included in the bidding form. The
bid could be awarded to a bidder who may not necessarily be the lowest bidder if deemed
beneficial to the public interest.
B.
Public-Private Partnerships
The Puerto Rico Public-Private Partnerships Act came into law on June 8, 2009 (the
“Public Private Partnerships Act”) to promote the establishment of public-private partnerships
for the creation of priority projects and, among other things, to further the development and
maintenance of infrastructure facilities, to apportion between the Commonwealth of Puerto Rico
and the contractor the risk involved in the development, operation or maintenance of such
projects and to improve the services rendered and the functions of the Government. See 27 P.R.
Laws Ann. §§ 2601, et seq.
To that end, the statute created the Public-Private Partnership Authority as a public
corporation of the Commonwealth of Puerto Rico. The duties and powers of the Authority shall
be discharged by a Board of Directors, which establishes the public policy of the Authority. See
Id. § 2604.
The Public-Private Partnership Authority was designated as the sole government entity
authorized and responsible for implementing the public policy on partnerships and for
determining the functions, services or facilities for which such partnerships are to be established.
Accordingly, the Public-Private Partnership Authority has the specific power of evaluating the
terms and conditions of each partnership contract and make recommendations in connection
therewith to the Board of Directors of the partnering government entity. See Id. § 2605.
C.
Requests for Proposals
Government agencies typically issue a request for proposals (RFP) for the acquisition of
technical service or sophisticated products and when the award will be based on additional
criteria besides price. The RFP process allows negotiation before a contract is awarded.
The agency issues an RFP containing all the information and instructions necessary for
companies to prepare their proposals. Subsequently, companies write and submit their proposals,
paying close attention to specifications in the RFP, such as required work plan, staffing, and
forms to be completed. Usually a committee reviews the proposals and select those deemed
Puerto Rico
8
competitive enough to continue in the negotiation process. Therefore, negotiations begin
between agency officials and the shortlisted companies.
D.
Bonds
Bids regulations typically require the issuance of a bid bond as well as a performance
bond to ensure that the winning bidder executes the contract and provide the required surety
bonds. Performance bond must be issued by an insurance company or a bank to guarantee
satisfactory performance.
E.
Mandatory Contract Provisions
Mandatory contract clauses are required by law and may also be required by agency
procurement regulations See 2 P.R. Laws Ann. § 97 (e); 3 P.R. Laws Ann. § 8615; §928c.
The following are brief summaries of mandatory provisions for certain types of contracts:
Puerto Rico
1.
Every contract subject to registration at the Office of the Comptroller must
contain a clear and conspicuous notice that must read as follows: “No
provision or consideration of services object of this contract may be
demanded until the same has been filed for registration with the Office of
the Comptroller pursuant to the provisions of Act No. 18 of October 30,
1975, as amended”.
2.
All contracts entered into by any government agency or instrumentality,
public corporation, municipality, the Legislative Branch or the Judicial
Branch of Puerto Rico must include a penal clause or clauses stating that
the conviction for any of the crimes listed in 3 P.R. Laws Ann. § 928b
shall entail, in addition to any other penalty, the automatic rescission of all
contracts in effect.
3.
Acceptance by the contractor of the norms established in the Code of
Ethics.
4.
Government contracts usually require the following certifications:
a.
Certification that contractor has filed income tax returns during the
last five tax years prior to the year in which the contract is to be
executed and that it does not have outstanding tax debts with the
Commonwealth of Puerto Rico of any sort or, if it has such debts,
that the contractor is subject to and is complying with a payment
plan.
b.
A certification from the Municipal Revenues Collection Center on
the absence of any tax debt or the existence of a payment plan.
9
Puerto Rico
c.
A certification from the Department of Labor and Human
Resources on the payment of unemployment insurance, temporary
disability, or social security taxes or premiums, as applicable.
d.
A negative debt certification from the Child Support
Administration. This requirement applies if the contractor is an
individual.
e.
A certification that the contractor is not involved in any conflict of
interest or of public policy.
f.
A certification that the contractor has not been convicted of
offenses against public integrity, as defined in the Penal Code, or
of embezzlement of public funds, and that he/she has not been
found guilty of any such type of offense in the courts of the
Commonwealth of Puerto Rico, the federal courts or the courts of
any jurisdiction of the United States.
5.
The contract must include a clause stating that said documents have been
attached to the contract.
6.
The contract must identify the legal provision authorizing its execution.
7.
A clause providing for the corresponding withholdings established in the
Internal Revenue Code.
8.
The budget appropriation from which the fees of the contractor shall be
paid.
9.
A clause indicating that the contracting government entity may terminate
the contract for professional services by giving notice thirty days prior to
its being terminated, or within a lesser term, depending upon the services
to be contracted.
10.
A clause indicating that the agency may terminate the contract
immediately in cases of negligence, dereliction of duties or noncompliance
by the contractor.
11.
A clause stating that, if required, the necessary dispensation has been
obtained from any government entity and that said dispensation shall
become part of the contracting record.
12.
In contracts with individuals, a clause shall be included indicating that the
contractor receives no payments or compensation for regular services
rendered under a designation from any other public entity, except those
authorized by law.
10
13.
F.
In professional contracts, a clause shall be included under which the
contractor accepts being knowledgeable of the rules of ethics of his/her
profession and assumes responsibility for his/her own actions.
Socioeconomic Policies
1.
Preference Act
On January 8, 2004, Puerto Rico passed Act 14. P. R. Laws Ann. Tit. 3, §§930 et seq.
(“Act 14”). The statute intends to promote the public policy of the Commonwealth of Puerto
Rico to support the growth, development and strengthening of the Puerto Rican industry. More
specifically, Act 14 pursues, among other objectives, to guarantee the greatest possible
participation of Puerto Rican producers of goods and services in government purchases and to
provide the necessary structures and mechanisms so that a greater number of local producers
may access the Government procurement market, whether through formal or informal auction,
open market, contract or special procedure.
Section 930c of Act 14 states that, in any procurement of goods by the Puerto Rico
Government, preference shall be given to goods, produced, manufactured, assembled or
packaged in Puerto Rico, or distributed by agents established in Puerto Rico, provided said goods
and services meet the specifications, terms, and conditions established in the bidding notice or
purchase order, and that their price, after applying the corresponding investment parameter, is the
lowest or offers the conditions of quality, delivery, and availability of goods and services.
The statute provides for the creation of the Puerto Rican Industry Investment Board
(“Board”), under the Puerto Rico Industrial Development Company. The Board is the
government entity with authority to grant certificates of preference and supervise the public
entities in their full compliance with the norms of action, criteria and other provisions of Act 14.
Pursuant to Section 930d of Act 14, the Board classifies the services rendered in Puerto
Rico as well as the articles extracted, produced, assembled or packed in Puerto Rico, or
distributed by agents established in Puerto Rico, taking into consideration whether the article or
service is offered by a company conducting substantial operations in Puerto Rico according to
the following factors: the added value in Puerto Rico, the number of jobs, the local payroll, the
local capital, the research and development operations in Puerto Rico, and the country of origin
of the materials used in the case of the purchase of products.
The Board assigns the corresponding investment parameter within the following items:
(1) Articles distributed by agents established in Puerto Rico, up to two percent (2 %).
(2) Articles packed in Puerto Rico, up to three percent (3 %).
(3) Articles assembled in Puerto Rico, up to four percent (4 %).
(4) Articles that constitute Puerto Rican products, up to ten percent (10 %).
(5) Services rendered by small and medium-size companies or cooperative-based
companies established in Puerto Rico, up to two percent (2%).
Puerto Rico
11
See P.R. Regs. PRIDCO REG. 8312, Reglamento General para Promover la Política de
Preferencia en las Compras del Gobierno, for details regarding the procedure that a company
must follow to apply for a certification as well as the evaluation criteria.
Board decisions granting a percentage discount must be made by resolution. Review of
said resolution --according to the Act and the regulations--may be undertaken by the Board motu
proprio or at the request of a party.
Finally, Act 14 provides that, secretaries of departments, heads of agencies and
instrumentality chiefs and the mayors, shall oversee that the professional and technical personnel
in charge of the drafting of specifications of articles to be purchased by the Government, and of
the acquisition of goods and services, perform their work taking into consideration the
availability of goods and services provided by enterprises that operate in Puerto Rico.
IV.
Bid Protests and Contract Disputes
A. Bid Protests
Losing bidders may, within 20 days after adjudication of the bid or the RFP, file a motion
for reconsideration. The agency must consider the motion within 30 days of filing. If the agency
makes a determination in its consideration, the term to petition the judicial review shall
commence as of the date a copy of the notification of the decision of the agency settling the
motion is filed. If the agency takes no action with respect to the motion for reconsideration
within 30 days from having been filed, it shall be understood that the motion was denied outright
and the term for judicial review shall commence to run as of that date. If the agency entertains
the motion for reconsideration, it shall render its decision within 30 days. The agency may
extend the term for a further period of 15 days. If no resolution is rendered within the 30 days,
or the extended term, the agency loss jurisdiction and the term to petition the judicial review
shall commence after the expiration of such term See 3 P.R. Laws Ann. § 2169.
B.
Bid Protest Appeals
The term for judicial review before the Puerto Rico Court of Appeals is 20 days from the
date the copy of the agency’s determination is filed in the administrative record. Typically, the
reconsideration and the judicial review processes do not stay the execution of the contract.
C.
Contract Disputes
1.
Contract Claims
The Courts of Puerto Rico have jurisdiction to entertain government contract’s disputes.
The Government must comply with what was agreed upon independently of any change in
government administration. Municipio de Ponce v. A.C. et al., 153 D.P.R. 1 (2000). A contract
executed between a government and an individual is subject to the same rules of contractual
interpretation that apply to contracts that are executed between private parties. 1978 Op. Sec.
Just. No. 15; 1978 Op. Sec. Just. No. 2; 1977 Op. Sec. Just. No. 11; 1972 Op. Sec. Just. No. 17;
Zequeira v. U.R.H.C., 83 P.R.R. 832 (1961); Rodríguez v. Municipality, 75 P.R.R. 449 (1953).
Puerto Rico
12
D.
Suspension and Debarment
Pursuant to Act 458, a government agency or instrumentality, public corporation or
municipality, or of the Legislative or Judicial Branches shall not award any bids or contract for
services or for the sale or delivery of goods to a natural or juridical person who has been
convicted or plead guilty in a federal or state forum, in any other jurisdiction of the United
States, or in any other country, for the commission of those crimes that constitute fraud,
embezzlement or misappropriation of public funds listed in § 928b of Act 458.
Bids regulations typically contain the following causes for debarment:
(1) Commission of fraud or a criminal offense in connection with (i) obtaining, (ii)
attempting to obtain, or (iii) performing a public contract or subcontract;
(2) Commission of embezzlement, theft, forgery, bribery, falsification or destruction of
records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving
stolen property;
(3) Commission of any other offense indicating a lack of business integrity or business
honesty that seriously and directly affects the present responsibility of a Government contractor
or subcontractor.
(4) Violation of the terms of a Government contract so serious as to justify debarment,
such as willful failure to perform in accordance with the terms of one or more contracts; or a
history of failure to perform, or of unsatisfactory performance of, one or more contracts.
V.
Administrative and Judicial Review
A.
Administrative Review
The process of reviewing bid’s or RFP’s awards of an administrative agency begins
within the agency itself. A non-winning bidder usually has the option of filing a Motion for
Reconsideration within the administrative agency that issued the decision or filing a writ of
administrative review before the Puerto Rico Court of Appeals.
B.
Judicial Review
The judicial standards of review of bid’s and RFP’s awards are whether the agency action
was arbitrary and capricious and whether the agency based its decision in substantial evidence.
Under the arbitrary and capricious standard, courts must consider whether the decision was based
on a consideration of the relevant factors and whether there has been a clear error of judgment.
Pursuant to the substantial evidence standard of review, courts are required to uphold the
agency’s if it is reasonable, or the record contains such evidence as a reasonable mind might
accept as adequate to support a conclusion.
1.
Puerto Rico
Summary of Selected Decisions
13
The following are Puerto Rico Supreme Court’s opinions which have helped shape
government procurement law in Puerto Rico:
a.
Nullification or termination of government contracts
Contracts executed in violation of the Municipal Law are null and void. A contractor
cannot benefit from municipality’s ultra vires actions. Morales v. Municipio de Toa Alta, 119
D.P.R. 682 (1987); San Miguel, Etc. & Co. v. Municipio, 72 D.P.R. 366, 376 (1951); De La Cruz
v. Government of the Capital, 68 D.P.R. 496 (1948); Gayá v. Government of the Capital, 68
D.P.R. 263 (1948); Torrellas v. Municipality, 62 D.P.R. 207 (1943).
Parties to a government contract may agree to include in their contracts a clause giving
only one of them the power to put an end to the contractual relationship. Such a clause is valid
under the provisions of Art. 1207 of the Puerto Rico Civil Code, 31 P.R. Laws Ann. § 3372,
which permits the contracting parties to establish the agreements, clauses, and conditions
convenient to them, provided they are not contrary to law, morals, or public order. The Puerto
Rico Supreme Court explained that this is similar to the “termination for convenience clause”
included in contracts with the Federal Government which provides for termination when the
public interest so requires. To temper the rigors of unilateral cancellation, termination of the
contract must not be allowed if there is bad faith or if there has been no change in the
circumstances and conditions that gave rise to the contract in the first place. The government also
has an obligation to pay for the work performed until the time of termination. Flores v.
Municipio de Caguas, 114 D.P.R. 521 (1983).
The agreements between Plaintiff and municipal officers were nulled and void inasmuch
as no public call for bids was made and neither a budget was previously approved for such
purposes. Bidding requirements can only be waived if there exist an emergency that requires the
immediate delivery of materials, equipment or the performance of services. To such effects, the
Mayor or his authorized representative must certify the facts or circumstances that warrant
waiving bidding procedure. Hantton v. Municipio de Ponce, 134 D.P.R. 101 (1994).
The fact that the bid had been awarded did not bar the Municipality Bid’s Board from
following the recommendations of its advisors and, if deemed necessary for the protection of the
best interest of the Municipality, to reverse the award of the bid. The rule in regard to this matter
recognizes this power of the Board of Awards in order to avoid any possibility of favoritism,
carelessness, extravagance, and corruption. Const. Corp. v. Municipio de Bayamón, 115 D.P.R.
559 (1984):
b.
When is the bid award binding?
The objective of provisions requiring contracts to be awarded to the lowest bidder is to
prevent favoritism, corruption, extravagance and improvidence in awarding contracts, and such
provisions should be so construed as fairly and reasonably to accomplish such purpose. The bid
award is not binding on public agency until formal contract is executed and, therefore, the
agency has the right to revoke the award at any time before formal contract is entered into with
bidder. Cancel v. Municipio de San Juan, 101 D.P.R. 296 (1973); Justiniano v. E.L.A., 100
D.P.R. 334 (1971).
Puerto Rico
14
c.
Culpa in contrahendo
Although an agency may set aside a bid award before the execution of the contract, it
could be liable to the bidder under the culpa in contrahendo doctrine, which means “fault in
negotiating”. Under this doctrine, a party can be compensated for the expenses it incurred in
reliance on the other party's offer to form a contract when the contract negotiations break down.
In determining whether a party is liable under Puerto Rico law for its conduct during
negotiations, the court must consider: (1) the development of the negotiations; (2) how they
began; (3) their course; (4) the conduct of the parties throughout them; (5) the stage at which
they were terminated and; (6) the parties' reasonable expectations to form a contract, as well as
any other relevant circumstance under the facts of the case. Producciones Tommy Muñiz v.
COPAN, 113 D.P.R. 517 (1982).
d.
Essential Conditions of the Invitation to Bid are part of the
Contract
The essential conditions and terms of the invitation to bid accepted by bidder to whom it
is awarded should be read as if they were part of the final contract. Said essential terms and
conditions may not be in conflict with the provisions of the contract. Puerto Rico Housing Bank
v. Pagán Insurance Unerwriters, 111 D.P.R. 1 (1981).
e.
Application of Preference Act Provisions
Pursuant to the Preference Procurement Act and its regulations the percentage of
preference granted by the Preference Board must be applied to each individual product selected
by the Board. Said percentage does not apply to the bidder itself or to his products in general.
The percentage of preference granted by the Board to each product shall be taken into
consideration, in all government purchase processes, regardless of whether the purchase was
made through a formal or informal bid, or in the open market. Mar-Mol Company Inc. v. General
Service Administration, 126 D.P.R. 864 (1990).
f.
Award Notification
The agency or municipality must send notification of the award to both successful and
non-successful bidders. At a minimum, notification awards must include: (1) names of the
bidders that participated in the process and a summary of their respective offers; (2) grounds of
the award; (3) defects, if any, of the unsuccessful bidders; (4) right to seek administrative and or
judicial revision and the applicable term thereof. The term for seeking reconsideration and
judicial review will not start to run unless the notification of the award complies with these
minimum requirements. Punta Arenas Concrete, Inc. v. J. Subastas, 153 D.P.R. 733 (2001); IM
Winner, Inc. v. Municipio de Guayanilla, 151 D.P.R. 30 (2000); RBR Const., S.E. v. A.C., 149
D.P.R. 836 (1999).
The term provided by Sec. 3.19 of the Uniform Administrative Act, 3 P.R. Laws Ann. §
2169 to request reconsideration of an adverse decision in a bidding proceeding begins to run
Puerto Rico
15
from the date the bid is awarded and not when a particular offer of one of the bidders is rejected.
Cotto v. Education Department, 138 D.P.R. 658 (1995).
g.
Standing to challenge bid award
Only bidders that have submitted offers during the bid proceedings are entitled to
challenge the award. A person that was invited to the bidding process but merely participates in a
bidders' meeting, without submitting an offer, is not considered a bidder. Velázquez v.
Administración de Terrenos, 153 D.P.R. 548 (2001).
h.
Taxes
Act No. 199 of September 6, 1996, 21 P.R. Laws Ann. §§ 4001, 4052(d), and 4057,
requires private companies contracted by an agency or instrumentality of the central, federal or
municipal government for the performance of construction work to pay municipal excise taxes
even if the contracting agencies do not have to procure a permit from the Regulations and
Permits Administration. Río Construction v. Municipality of Carolina, 153 D.P.R. 615 (2001).
i.
The bid shall be awarded to the lowest qualified and
responsible bidder
The agency, with its vast experience and expertise, is ordinarily in a better position than
courts to determine the best bidder. The contracting agency can take into account relevant past
performance information regarding bidder’s predecessor companies, key personnel, and mayor
subcontractors, and must consider the currency, relevance, source, and context of the
information, and general trends in contractor's performance. The bid shall be awarded to the
lowest qualified and responsible bidder and not merely to the lowest bidder. Empresas Toledo v.
Junta de Subastas, 168 D.P.R. 771, 778 (2006); A.E.E. v. Maxon Engineering Services, Inc., 163
D.P.R. 434, 439 (2004).
j.
Enabling statute must confer authority
The Puerto Rico Caribbean Cardiovascular Center Corporation acted in an ultra vires
manner when it required that a cleaning services company deposit a bond as a jurisdictional
requisite for judicial review of a bid award because its enabling statute does not confer such
authority. Perfect Cleaning v. Centro Cardiovascular, 162 D.P.R. 745 (2004)
k.
Alter ego
A judicial determination that declared that a juridical person is an alter ego of another
who is prevented from soliciting and contracting with government agencies, prevents that the
alter ego be awarded a bid in government future bid proceedings. Casco Sales v. Municipio de
Barranquitas, 172 D.P.R. 825 (2007).
l.
Puerto Rico
Public records
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After the bid award, the documents contained in the administrative file are considered
public records subject to inspection by any citizen, pursuant to Article 409 of Puerto Rico Civil
Code, 32 P.R. Law Ann. § 1781 (“Every citizen has a right to inspect and take a copy of any
public document of Puerto Rico, except as otherwise expressly provided by law”). The agency
must allow the examination of the administrative file by the unsuccessful bidders with sufficient
time prior to the applicable term to challenge the adjudication. Trans Ad de Puerto Rico, Inc. v.
Junta de Subastas Autoridad, 174 D.P.R. 56 (2008).
m.
Clarification process during procurement proceedings
A hybrid proceeding, which meets all the characteristics of a formal bid but that also
incorporates clarification and participation mechanisms, typical of an informal auction, is valid.
The term “clarifications” should be construed broadly. Rather than being for the sole purpose of
eliminating minor irregularities, informalities, or apparent clerical mistakes, clarifications should
provide offerors the opportunity to clarify certain aspects of proposals. Caribbean
Communications v. Policía de Puerto Rico, 176 D.P.R. 978 (2009).
VI.
Extent of State’s Adoption or Adaptation of ABA Model Procurement Code
Puerto Rico procurement law and regulations are not modeled after the American Bar
Association Model Procurement Code for State and Local Government. On September 15, 2015,
Puerto Rico Legislature passed Act No. 153 with the purpose of adopting uniformed standards of
evaluation, adjudication and review of procurement of goods and services by the agencies.
Further Act No. 153 intends to centralize government procurement of certain goods and services
to achieve cost savings through economies of scale. It creates a Technical Advice Committee and
a Bids Review Board attached to the Administration.
Puerto Rico
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American Bar Association
SECTION OF STATE AND LOCAL GOVERNMENT LAW
2016 SPRING MEETING
Contract Disputes with
State and Local Agencies
Edmund M. Amorosi
SMITH PACHTER MCWHORTER PLC
April 7-10, 2016
Intercontinental Hotel
San Juan, Puerto Rico
Claims By and Against
State and Local Governments
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Differences from Federal Contract Disputes
•
•
•
•
•
Different administrative claims review processes
Varying waivers of sovereign immunity
Frequently harder to find the governing rules
No uniform set of procedures
Intermediate administrative level decision-makers
(binding or non-binding?)
• Jurisdictional disputes (Abadie et al. v. D.C. Contract
Appeals Board, 843 A.2d 738 (D.C. 2004).
• State courts with various local rules
2
Multiple Contracting Levels
• States and Territories
• Counties, Cities, School Boards
• Independent multi-jurisdictional bodies
• Multi-state consortium
3
Identifying the Governing Rules
•
•
•
•
•
State or local statutes or regulations
Vendor or procurement manuals
Solicitation provisions
Potential conflicts between federal, state, or local rules
Application of federal procurement law and regulation
to state and local procurements involving federal funds
4
Waiver of Sovereign Immunity
• State may expressly waive sovereign immunity
• Alaska: a corporation having a contract claim against the state
may bring an action in state court that has jurisdiction over the
claim. Alaska Stat. Ann. § 09.50.250
• Georgia: “The state’s defense of sovereign immunity is hereby
waived as to any action ex contract for the breach of any written
contract now existing or hereafter entered into by the state or its
departments and agencies.” Ga. Const. art. I, § 2, ¶ IX.
• Virginia: The Virginia Public Procurement Act (Va. Code 2.24300 et seq.) constitutes a waiver of sovereign immunity by
public bodies by the Commonwealth. Sabre Constr. Corp. v.
County of Fairfax, 256 Va. 68 (1998).
5
Waiver of Sovereign Immunity
• Waivers of sovereign immunity are in derogation of the
common law and are narrowly construed.
• Counties, cities, towns, and municipalities, when
performing governmental functions, typically enjoy the
same protections of sovereign immunity as the State.
6
Sovereign Immunity - Authority to Contract
• TXU Energy Retail Co., LLC v. Ft. Bend Indep. School
Dist., 472 S.W. 3d 462 (Tex. App. 2015)
• King George Cnty. Serv. Auth. v. Presidential Serv. Co.
Tier II, 267 Va. 448, 454-55 (2004)
7
Contract Claims
• Some states and localities have mandatory dispute
resolution procedures such as:
•
•
•
•
Venue requirements;
Exhaustion of administrative procedures before judicial review;
Notice of claim requirements; and
Limits on alternative dispute resolution.
• State Examples:
• Georgia: breach of contract claims against state or agencies filed in
Superior Court of Fulton County. Ga. Code Ann. § 50-21-1.
• Virginia: non-binding mediation or arbitration only. Va. Code §
2.2-4366.
8
Contract Claims - Administrative Review
• Example of actual administrative review procedure:
• Contractor files notice of claim to County and Program Manager
(outside contractor) within 15 days of event giving rise to claim;
• Contractor must provide a detailed certified claim within 30 days
after initial notice to the Program Manager, who then has 30 days
to decide the claim;
• If denied, the Contractor has 15 days to appeal to the County
Manager, who then has 30 days to decide the appeal;
• If denied by the County Manager, the Contractor must appeal
within six months to the County Board, which then must decide the
claim within 90 days;
• If the County Board denies the claim, then and only then can the
contractor file suit in Virginia circuit court, but it must do so within
30 days of the County Board’s decision.
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Administrative Claims Process
420 Days
Day of Event
Notice of Claim
15 Days
30 Days
PM Decision
30 Days
Certified Claim
CM Decision on
Appeal
15 Days
30 Days
Appeal to County
Manager
10
Decision
6 Months
90 Days
Appeal to County
Board
30 Days
Circuit Court
Filing
Contract Claims
• Bramble, Inc. v. Md. State Hwy. Admin., 2015 WL
6090614 (Sept. 25, 2015) (dismissing substantive claim
as not filed within the 90 day period; even if contractor
properly noticed claim within 30 days after the basis for
the claim was known or should have been known).
• Commonwealth of Virginia v. AMEC Civil, 280 Va. 396
(2010) (reversing $21 million contractor judgment for,
inter alia, failing to give written notice within time
stated even though agency had actual notice of claims
through meeting minutes and e-mails).
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Contract Claims – Administrative Review
Be aware of potential conflicting deadlines for filing appeals from
administrative denials.
• Va. Code § 2.2-4363(E) states: “The decision … shall be final …
unless the contractor appeals within six months of the date of
the final decision on the claim by the public body ...”
• Va. Code § 2.2-4365 states that a contractor must bring a
complaint in circuit court within 30 days of the date of the
county’s disallowance of a contractor’s claim.
• Va. Code 15.2-1246: “[claimant] may appeal within 30 days
after service of such notice. In no case shall the appeal be taken
after the lapse of six months from the date of the decision.”
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Limitations on Contractor’s Damages
• Some states and localities prohibit or limit amount of
punitive or consequential damages a contractor may
recover.
• State Examples:
• Alabama: limits civil liability of government entities to $100,000
for damage or loss of property; only in tort actions. Ala. § 11-93-2.
No punitive damages against state or any county/municipality.
• Idaho: government entities and their employees not liable for
punitive damages. Idaho Code § 6-918.
• New Jersey: there shall be no recovery against the State for
punitive or consequential damages arising out of contract nor shall
there be any recovery against the State for claims based upon
implied warranties or upon contracts implied in law. N.J. Stat. Ann.
§ 59:13-3.
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Contractor Claims
• Some states allow cost recovery for false or baseless
delay claims asserted by the contractor and for a
public agency’s bad faith denial of a valid claim.
See, e.g., Va. Code § 2.2-4335(C)-(D).
• A contractor who presents a false or fraudulent claim
to a public body may face criminal prosecution in
some states. See, e.g., Va. Code § 18.2-498.1 et seq.
14
State False Claims Acts
• 32 states have statutes similar to equivalent to the federal False Claims Act.
o May be limited to Medicaid false claims.
o Qui Tam provisions being incorporated more frequently.
• Broward County, Chicago, County of Allegheny, District of Columbia, Miami-Dade
County, New York City, and Philadelphia have enacted city/county-level FCA
legislation
• State Examples:
o Delaware: defendant is liable for any false claims when the government of
Delaware provides any portion of the funds. Broad definition of ‘government.’
Del. Code Ann. tit. 6, §§ 1201 et seq.
o Georgia: only claims regarding Medicaid Fraud are the proper subject of a suit.
Ga. Code Ann. § 49-4-168 et. seq.
o Virginia: “Virginia Fraud Against Taxpayers Act” mirrors FCA. Violators must
pay civil penalty of not less than $5,000 and not more than $10,000. Va. Code §
8.01-216.3
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State False Claim Act OIG Reviews
State False Claims Act OIG Reviews
To qualify for the financial incentive and be deemed complaint by the
HHS OIG, a state’s false claims act must:
• establish liability to the State for false or fraudulent claims, as
described in the Federal False Claims Act (FCA), with respect to
Medicaid spending,
• contain provisions that are at least as effective in rewarding and
facilitating qui tam actions for false or fraudulent claims as those
described in the FCA,
• contain a requirement for filing an action under seal for 60 days with
review by the State Attorney General, and
• contain a civil penalty that is not less than the amount of the civil
penalty authorized under the FCA. Social Security Act §1909(b).
16
State False Claim Act OIG Reviews
OIG State False Claim Act Reviews:
• Approved: CA, CO, CT, DE, GA, HI, IL, IN, IA, MA, MN, MT, NY,
RI, TN, TX, VA, VT, WA
• Not Approved: FL, LA, MI, NV, NH, NJ, NM, NC, OK, WI
• Remainder Not Submitted for Review or Under Review
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State False Claims Acts
Examples of State FCA Settlements in 2015 and 2016
• Massachusetts – Three construction companies agreed to pay $1.4 million to
settle allegations that they falsely certified compliance with certain state and
federal equal opportunity requirements relating to public construction
contracts. One of the companies was permanently debarred.
• Multi-State – A nationwide delivery company agreed to pay $4.2 million
stemming from allegations that its employees violated the false claims acts of
14 states and the cities of NYC, Washington, and Chicago by recording
inaccurate delivery times and inappropriately using “exception codes” on
packages sent by agencies via next-day delivery services. The carrier also
agreed to pay $25 million to the USG and New Jersey to settle the same
claims.
• New Jersey – An environmental firm agreed to pay $2 million to settle
allegations under federal and state law that it submitted false claims to the
state by not following testing requirements. This was the largest nonMedicaid settlement in New Jersey.
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Questions?
Edmund Amorosi – [email protected]
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