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Adam Lasky for Seattle DJC: “Legislation could impact bidding on state contracts”

Fri Sep 14, 2012

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Legislation could impact bidding on state contracts

During committee hearings on House Bill 2452, there was a push by some to expand the bill to cover public works construction contracting.

Oles Morrison Rinker & Baker
In 2011, several Washington state agencies heavily involved in public procurement were merged into the newly created Department of Enterprise Services.

As part of this merger, DES was tasked with reforming and consolidating the state’s procurement practices and policies. The result of DES’s efforts is House Bill 2452, which was passed this month by both the House and Senate. It now awaits the governor’s signature.

As currently drafted, this legislation could have dramatic effects on contractors bidding on state goods and services contracts.

The proposed legislation is quite lengthy. However, a few aspects jump out as being of concern to contractors:


Under the proposed legislation, DES has authority to debar a contractor from bidding on all state purchasing contracts for up to three years.

The legislation lists a number of bases upon which DES can disbar a contractor. Some are very specific (such as convictions for certain crimes, and federal labor relations act violations), but others appear to give DES nearly unlimited discretion in its reason for disbarring a contractor.

For instance, DES may disbar a contractor if they deliberately fail to complete a contract in compliance with the specifications or within the specified time, if they fail to complete performance of a “recent” contract, if they “unsatisfactorily” perform a “recent” contract, or for “any other cause the director determines to be serious and compelling.”

Contract award process

One of the most important issues with the proposed legislation is the section that covers the contract award process.

This section appears to give agencies additional discretion in selecting the winning bid by expanding their authority to determine whether bidders are responsive and responsible. Yet the awarding agency’s discretion is still limited by the legislation’s requirement that the contract can only be awarded to the “lowest responsive and responsible bidder.”

While the legislation purports to allow an agency to consider best value criteria (such as diversity, life-cycle costs, and other non-price criteria) in determining the lowest responsive and responsible bidder, it does not permit an agency to actually award based on a true “best value” analysis, because it still limits award to the lowest bidder deemed responsible and responsive.

For example, if two responsible bidders both offer technical proposals that meet the solicitations requirements (i.e., “responsive”), the agency will only be able to award the contract to the contractor offering the lower of the two bid prices. In a true “best value” evaluation, the agency would be able to award the contract to the higher priced bidder, if that bidder’s superior technical proposal and experience outweighed the difference in price.

As a result, an agency’s only way to award on a true “best value” basis will be to disqualify bidders as non-responsive and non-responsible if their bid prices are lower than the bid that the agency feels is the true “best value.” This may lead to agencies improperly disqualifying bids that are responsive and responsible.

The legislation also allows agencies to request best and final offers from responsive and responsible bidders, and then to negotiate with only the lowest responsive and responsible bidder in order to determine if the bid may be improved. This permits agencies to induce bidders who are already offering the lowest price to lower their bids even further.

Most concerning in this section is the provision giving an agency discretion to reject bids solely on the basis that the bidder failed to perform “satisfactorily” on a previous state contract, particularly since the legislation fails to define what constitutes “satisfactory” performance.

Bid protest bonds

A protest bond is a bond that a contractor must file as a prerequisite to filing a bid protest, and if the bid protest is rejected then the contracting agency may be able to recover its costs in defending the bid protest (and potentially other damages) from the contractor’s protest bond.

Only a handful of states allow agencies to require protest bonds, and Washington is not amongst them. However, under the proposed legislation, a Washington state agency would now be allowed to require a contractor post a “protest bond” as a condition to filing a bid protest.

The only limitation in the proposed legislation is that agencies must adhere to DES policies regarding the use of protest bonds, but the legislation sets no guidelines or limitations on DES’s protest bond policies. This is of particular concern because in the few jurisdictions that currently allow protest bonds there are a number of safeguards that limit the use, amount and applicability of protest bonds. Under the proposed legislation, there is no guarantee that any of these safeguards will be present in Washington.

There are several obvious problems that contractors may face as a result of agencies being authorized to require protest bonds. The protest bond requirement could completely deprive contractors of their right to file a bid protest if they lack the bonding capacity necessary to obtain a protest bond, or if they are unable to obtain a protest bond in the few days allotted for filing a protest.

Additionally, it may discourage contractors from filing legitimate bid protests out of fear that they could lose the amount of the bond if the agency denies the bid protest. This is particularly true if the agency itself is the one who will decide the protest.

By requiring protest bonds, legitimate bid protests will not be filed, and there will be less protection of the public’s interest in the competitive bidding process.

It is also questionable whether, if enacted, the protest bond requirement would be enforceable under Washington law. In other states, challenges to the protest bond requirement have been met with mixed results.

It is also worth noting that the language allowing protest bonds was included in the proposed legislation despite the fact that two-thirds of the relevant comments received in response to DES’s procurement review survey were against allowing protest bonds.

Although the legislation is only targeted towards goods and services contracts, construction contractors should be equally concerned. During the committee hearings on House Bill 2452, there was a push by some to expand the bill to cover public works construction contracting.

While the current bill was not amended to cover to public works contracts, it appears inevitable that similar legislation to cover public works contracting will not be far behind.

Adam Lasky is an attorney in the Seattle office of Oles Morrison Rinker & Baker. His practice focuses on construction litigation and government contracts.