PUBLIC CONTRACTING THEN & NOW

2. PUBLIC CONTRACTING THEN & NOW presented by Eileen G. Eakins Jordan Schrader PC, Attorneys at Law

3. Applicable Law • ORS Chapter 279A, 279B, & 279C • Attorney General Model Rules • Contract Review Board Rules • Federal and State Case Law • Federal Rules When Federal Money Involved

4. History of Public Contracting • Until early 1990, contracts awarded to lowest bidder based on sealed bids • Couldn’t pay more for quality • “You get what you pay for” • “If it seems too good to be true, it probably is” • Standards loosened in 1993 • Balance between performance and price • Less emphasis on sealed bids • Quality and performance criteria • Discretion and alternatives

5. Elements of a Contract • Offer, Acceptance and Consideration • Offer is the bid, not the solicitation • Acceptance is the award, not the notice of award • Consideration is payment and performance • Contract requires mutual assent • Intent to be bound

6. Offers: The Bid • Susceptible to acceptance • Binding when accepted • Can be revoked/withdrawn before acceptance • May be irrevocable • May be rejected or ignored • Bid is agreement to sign contract

7. ORS Chapter 279A, B and C • Adopted 2003, effective March 1, 2005 • Applies to contracts advertised after March 1 • Some changes effective earlier • Subcontractor disclosures • Bid submission deadlines • Time for bid openings • Most parts are self-implementing • Model Rules: Districts may adopt all or part, or adopt own rules • Local Rules to implement state law • Existing rules became invalid March 1, 2005

8. Model Rules (OAR Chapter 137) • Division 46 – Rules applicable to all contracts • Division 47 – Procurement of goods and services (Procurement = purchasing, leasing, renting or otherwise acquiring) • Division 48 – Selection of architects, engineers and land surveyors • Division 49 – Public improvement contracts • Opting out

9. ORS Chapter 279 A (Overarching) • Policy statement • Definitions • Applicability • Exceptions • Authorities • Method to determine if contract type belongs in subchapter A or B ORS 279 B General Procurement • All contracting and procurement activities that are not Public Improvement construction • General provisions • Source selection • Contract formation • Specifications • Contract preferences • Legal remedies ORS 279 C Public Improvement (Construction) • Typical construction • Roads • Bridges • Buildings • Renovation • Maintenance • Repairs • A&E contracts • Design/Bid/Build procurements • Alternative contracting • BOLI provisions

10. Contract Review Board/ Contracting Agency • District Board is CRB without further action • 2 Categories of Responsibility (CRB and “contracting agency”) • CRB responsibility performed by governing body • Governing body may delegate CRB responsibility • Agency responsibility can be delegated and subdelegated • Requires delegation rule • Determine Purchasing Agent

11. Local Rules Required • Dollar limits for informal bidding requirements • Personal service contract or small procurements and selection procedures* • Allowing correction and withdrawal of bids • Use of sole source procurements • Delegation of decision-making authority • Bidder prequalification and debarment procedures* • Purchases from Federal Catalogues* • Surplus property disposal procedures • Electronic notice of solicitations* • Authority to use RFPs for public improvements *LCRB must adopt

12. Purposes ofCompetitive Bidding • Process to determine price • Establishes contractual relationship • Achieve lowest cost • Protect public • Prevent favoritism • Applies to all public contracts, unless an exemption applies

13. Exceptions and Exemptions • Exceptions = public contracting rules don’t apply • Exemptions = excused from competitive bidding • Statutory exceptions: • Real estate • Contracts with other governments • Contracts with non-profits helping the disabled • Grants • Energy saving performance contracts • Loan or investment contracts • Employee benefit plans • Equipment contracts between fire departments

14. Exemption from Competitive Bidding • Statutory Exemptions: Grants; minor alterations, repair and maintenance; financing agreements • Exemptions by Rule: Contracts under certain amount, contract amendments, sole source • CRB Exemptions: “Special Procurement”

15. ORS 279BProcurement Authority • Goods and services

16. Procurement of Goods and Services • Depends on what’s being purchased • Choose ITB or RFP: • ITB for common goods/service where price is main factor • RFP for unique products or provision of services • Adopt Model Rules: See handout for advertising, notice and award procedures for ITB and RFP

17. Procurement Methods • Alternatives • Small procurements • Intermediate procurements • Sole source procurements • Emergency procurements • Special procurements

18. Dollar Amount Exceptions • Prior law: under $5,000, and $5,000 to $75,000 • Small procurements: $5,000 or less • Need rules; not automatic [no longer true per HB 2259] • Award Criteria: “Manner deemed practical or convenient” • Includes direct selection • Amendments: Rules must address • Intermediate procurements: $5,000 to $150,000 ($100,000 for public improvement) • 3 informal price quotes or competitive proposals • Award Criteria: “Best serve the interests of the contracting agency” • Need rules for amendment, but not authority • Written quotes over $75,000 • Over $150,000: formal bidding using ITB or RFP, unless exempted by local rule

19. Exemptions: “Special Procurements” • 2 types: class and contract-specific • Requires approval by CRB • Similar to prior law – same criteria; OR • More flexibility than before: “substantially promote the public interest” • Contract may be awarded based on “most advantageous to the agency” • Doesn’t apply to public improvements

20. Exemptions: Sole Source Suppliers • Prior law: no brand, manufacturer or seller names without exemption and findings • Now, agency or delegate can purchase without bidding if goods or service available from one source • Local rules required, and delegation must be in writing • Written findings required to support; statute provides guidelines • Must negotiate with sole source to extent reasonably practical for best contract terms

21. Exemptions: Brand Names • Brand name or equal specification allowed when used as example of quality • Must be based on findings of no favoritism, cost savings, necessary quality, or efficient use of existing equipment

22. Exemptions: Emergency Contracts • Emergency: (1) not reasonably foreseeable (2) risk of loss or threat to safety (3) requires contract promptly • Used to be statutory process; now local rules apply, but emergency must be formally declared [HB 2214] • Document the emergency and process used • Can be awarded by the “head of a contracting agency,” or designee named in writing

23. Products and Services of Non-Profits Employing the Disabled • Old law retained • Check DAS list of qualified products/services • If meet specs and available, must use • Such contracts may not be competitively bid

24. Exemptions: Qualified Products List • Agency may develop and maintain list • Public notice requirement to submit goods for testing and inclusion on list • Inclusion on list must be based on results of test • No public records disclosure • Different from prequalification of bidders

25. Exemptions:Prequalification of Bidders • Old law required rules, resolution or ordinance describing prescribed process; new law allows agency to determine process, or CRB can adopt rules • Process described statute (ORS 279B.125) • Up to 30 days to respond to bidder application • If agency disqualifies, must state reason and right to hearing • Notice of appeal given no more than 3 business days after receipt of notice • Agency has 30 days to conduct hearing • Prequalification may be revoked or modified

26. Prequalification Standards • “Responsibility” • Financial, material, equipment, facility, and personnel • Satisfactory record of performance • Satisfactory record of integrity • Legally qualified to contract • Supplied necessary information • Not been debarred by district

27. Debarment of Bidders • Prior law: “disqualification” • Process the same, but reasons changed • P. 14 of handout • Notice and hearing required • Must state reasons • Up to 3 years

28. Bidder Debarment (formerly “Disqualification”) • Reasons: Conviction of crime incident to public or private contract; conviction for embezzlement, theft, forgery, bribery or other crime indicating lack of honesty; conviction for antitrust; contract violations; failure to carry worker’s comp or unemployment insurance • Appeal: Filing deadline within 3 business days, notice of hearing by LCRB, findings and reasons, appeal to court

29. Prequalification and Debarment • LCRB must adopt procedures for hearings • All administrative remedies must be exhausted before appealing to court

30. Preference for Oregon Products and Services • Resident bidders: business in Oregon for 12 months • Preference for goods and services • All things being equal • Foreign contractors: for $10,000 contract, must report to ODR before final payment • For improvement contracts, bid documents must ask for resident bidder status, and indicate percentage increase for foreign bidders • DAS publishes list of preferences in other states • Model Rules: procedures for determining if goods made in Oregon

31. Personal Services • Significant changes • Not defined; district must determine definition and contracts or classes of contracts • Must adopt rules for screening and selection, or select based on procurement procedures • May include architects, engineers, surveyors, and related services • Prior law precluded contracts based on price: district may now include in definition

32. Personal Services (con’t) • Direct appointment allowed: dollar limit required for architects, engineers, surveyors • Model Rules don’t apply to districts unless adopted • QBS: • State agencies must use • Local agencies only if $400,000 [$900,000 beginning January 2006, per HB 3272] project and 35% [10%] comes from state funds • May be required on federal projects

33. Price Agreements • Replaces “requirements contracts” • Set price • No guarantee of minimum/maximum purchase • Continuing obligation to provide goods/services • May be exclusive

34. Cooperative Procurements • Dispenses with competitive bidding after original solicitation • “Piggybacking” still allowed • New law expands requirements and terms • “Joint Cooperative Procurements” • Participating agencies identified • Allowed for public improvements, per HB 2214 • “Permissive Cooperative Procurements” • Participating agencies not identified • Notice requirements for participation • Not allowed for public improvements, per HB 2214 • “Interstate Cooperative Procurements”

35. Sale of Surplus Property • Before: no competitive bidding if liquidation would result in greater net revenue • Now: district must adopt rules, which may exempt disposal from competitive bidding • No Model Rule: if district doesn’t adopt rule, must use competitive bidding

36. Public Improvement Contracts Generally: ORS 279C • Least amount of change; reorganized • Construction, reconstruction or major renovation on real property by or for a public agency • Not emergency work, minor alterations or ordinary repair or maintenance • Excludes projects using no district funds

37. Public Improvement Exemptions • Contracts under $5,000 • Contracts between $5,000 and $100,000 if intermediate procurement process used (competitive quotes) • Contracts with non-profits employing the disabled • Contracts for which exemption adopted • Competitive proposal process if exemption taken • Emergency contracts

38. Solicitation • Goal of solicitation documents: clearly communicate needs of the project, the requirements for submission, and the evaluation criteria • Statute describes minimum requirements • May be ITB or RFP

39. ITBs • Sole source projects if exemption adopted: • No favoritism • Cost savings • Only 1 manufacturer/provider; or • Efficient use of existing equipment

40. Public Improvements – ITB Process • Traditional process largely unchanged • BOLI filing at least 30 days before adoption of budget • Alterations, repairs and maintenance are procurements, not improvements • Advertising: can advertise electronically, by CRB rule, rather than newspaper of general circulation. Projects over $125,000 still require trade journal ad.

41. Advertising for Bids • Requirements established by statute and rule • Published at least once in newspaper of general circulation (or electronically, if authorized by LCRB) • Additional publications • Trade paper if public improvement of $125,000 or more

42. Contents of Ad • Description of project • Subject to prevailing wage laws? • Time/date for bid submission • Prequalification application date and classes • Character of work or materials • Location to review specifications • Person to receive bids (name and title) • Date, time, place for public opening

43. Bid Documents for Public Improvement • Contents • Invitation to Bid (advertisement) • Instructions to Bidders • Contract Form • Bid Form • General Conditions • Special Conditions • Bond Forms • Specifications/Drawings/Plans • Addenda • First-Tier Subcontractor Form

44. Responsiveness and Responsibility • General rule: LRRB now defined by statute • Responsiveness: substantial compliance • Responsibility: • Financial, material, equipment and personnel, or ability to obtain resources and expertise • Record of performance • Record of integrity • Legally qualified; not debarred • Supplied necessary qualification information

45. Public Improvements – RFP Process • “Competitive proposals” rather than bids • Exemption required • Subject to most competitive bidding rules • Need not be based on price; “most advantageous” • Not subject to: • First tier subcontractor disclosure • Reciprocal preferences • Non-disclosure of proposals if submitted in confidence • Method of selection must be in RFP

46. RFP Process (con’t) • Many alternative selection techniques • Ranking (award without negotiation) • Discussions to clarify and revise proposals • Serial negotiations • Competitive negotiations • Multi-tiered competition (determine classes of proposers) • Multi-step RFP (eliminate lower ranked proposers) • Any combination adopted • Award to responsible proposer determined in writing to be most advantageous to the agency based on evaluation process and factors described in the RFP, and negotiations authorized by the RFP

47. Security • Bid security (10%) unless exempted by CRB • Bond, LOC, check • May require bid security on procurements • Performance security (100%) unless exempted [or unless contract under $50,000 – see HB 2214 (effective immediately)] • Bond or check • May require on procurements • Payment bonds (100%) unless exempted [or unless contract under $50,000 – see HB 2214 (effective immediately)] • Bond or check • Bond provider must have state certificate of authority

48. Prevailing Wages • $25,000 or more for “public works” projects [increases to $50,000 on Jan. 1, 2006 – volunteer labor/donations NOT included in calculation – See SB 477] • “Public work” includes painting but excludes work on leased property and projects where no public funds are used • Paid by contractors and subcontractors • Solicitation and contract must include requirements • Must notify BOLI within 30 days of PW contract • Federal prevailing wages apply if federal funds (Davis-Bacon)

49. In-House Projects • Contracting not required • Cost accounting system required for projects over $5,000 • If over $125,000, prove that using own personnel and equipment is “least costly alternative” • Keep accurate accounting • Annual list of projects: indicate whether contracted or in-house

50. Award • To lowest responsible responsive bidder • May reject all bids • LRRB must sign contract or forfeit bid security • Preferences, resident bidders