Livingston Procurement Law
Procurement Alert
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Maryland Procurement Alert Vol. IV, 2010
 
Best Value is in the Eyes of the Beholder.

Aramark Correctional Services, LLC, MSBCA Nos. 2660, 2695 & 2696 (July 9, 2010)
In Aramark, the Board upheld the agency's selection of awardee, and overlooked violations of procedural requirements both in the Request for Proposals ("RFP") and a regulation.

In January 2009, the Department of Public Safety and Correctional Services ("DPSCS") issued an RFP seeking commissary services for incarcerated individuals. Two vendors submitted proposals. DPSCS proceeded actively to check the references of Appellant, yet relied on prior oral discussions with officials from other jurisdictions in failing to follow up on the Interested Party's references.

After oral discussions with the agency, both vendors submitted Best And Final Offers ("BAFOs") in response to the procurement officer's request. The procurement officer requested a second round of BAFOs, to which both vendors responded. This second request for BAFOs was not supported by a written determination from the agency head or designee that additional BAFOs were in the State's best interest. COMAR 21.05.03.03 D (1) provides:

[T]he procurement officer may require more than one series of submissions of best and final offers and discussions if the agency head or designee makes a written determination that it is in the State's best interest to conduct additional discussions or change the procurement agency's requirements and require another submission of best and final offers.
DPSCS decided to award to the Interested Party, despite Appellant's second BAFO financial proposal which offered approximately 25% more revenue to the State than the Interested Party's second BAFO.

After a debriefing, Appellant protested on the grounds that (a) that DPSCS performed an inadequate analysis of "best value," (b) that DPSCS was confused as to certain aspects of Appellant's proposal, and (c) that DPSCS violated two procedural provisions: (1) the RFP's requirement that the Evaluation Committee ask "uniform questions" of references, and (2) Code of Md. Reg's ("COMAR") 21.05.03.03D's requirement of a written determination from the agency head or designee in order to request additional BAFOs.

The Board found that DPSCS violated the procedural requirements set forth in the RFP and COMAR. However, the Board determined that, in this particular circumstance, the procedural violations did not rise to a level that would justify upholding the appeal. The Board provided for reasons:

1. Appellant did not allege that the second BAFO was not defective;

2. The flaws were strictly procedural, rather than substantive;

3. DPSCS substantially complied with COMAR's requirement because the Deputy Secretary orally authorized the second BAFO request; and

4. Neither offeror was prejudiced by the second BAFO request.

As to the agency's confusion regarding Appellant's proposal, the Board noted that Appellant should have better explained the terms of its proposal to DPSCS. Regarding DPSCS' determination of "best value," the Board stated that DPSCS did not act arbitrarily or capriciously in selecting the Interested Party's proposal. The Board noted that Interested Party's proposal and oral presentation were more detailed and forthright regarding an important technical aspect of the solicitation; namely, the integration of the proposed computer system with DPSCS' existing accounting system.

 
 
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Responsibility versus Responsiveness.

Kinsail Corp., MSBCA No. 2697 (Aug 31, 2010)

In Kinsail, the Board upheld the State Highway Administration's ("SHA's") elimination of a proposal from further consideration as a result of a proposer's failure to demonstrate sufficient financial capability to complete contract performance.

In June 2009, SHA issued a Request for Proposals ("RFP") seeking offerors to provide an automated hauling permit system including e-check and credit card processing. The procurement was a revenue generating contract, i.e. this procurement was expected to cost the State nothing. SHA expected a negotiated price arrangement with the awardee regarding a set fee per permit.

The RFP contained requirements, in different sections, for "recently audited (or best available) financial statements," and "the last two (2) years of audited financial statements." Appellant had only been in business for approximately a year. Appellant submitted its "best available" financial statements: one and a half years (1.5) worth of unaudited financial statements. After conducting oral interviews with Appellant, SHA requested additional information regarding financial capability. SHA later deemed Appellant "not reasonably susceptible of being selected for award," rejecting Appellant's suggestion that Appellant submit a performance or surety bond in order to address financial concerns.

Appellant argued that SHA wrongfully interpreted the RFP and that two years of audited financial statements were required. The Board agreed with Appellant that SHA's conduct in negotiations would support a finding that SHA acted capriciously if SHA rejected Appellant's proposal on this basis. However, the Board agreed with SHA that its determination dealt with responsibility, rather than responsiveness. COMAR 21.01.02.01 B (77) states:

"Responsible" means a person who has the capability in all respects to perform fully the contract requirements, and the integrity and reliability that shall assure good faith performance.
COMAR 21.02.01.02.01 B (78) states:

"Responsive" means a bid submitted in response to an invitation for bids that conforms in all material respects to the requirements contained in the invitation for bids.
Based upon Appellant's demonstrated financial weaknesses, the Board upheld SHA's determination that Appellant was non-responsible.

 
 
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When is an agreement with a state agency a "procurement contract"?

How do you know if your agreement is a "procurement contract"? The Maryland Court of Special Appeals ("COSA") recently answered that question in a case where the Maryland Transportation Authority ("MdTA") entered into an agreement with the MdTA Police Lodge #34 of the Fraternal Order of Police, Inc. ("Police Lodge"). In 2006, MdTA promised to fund a Personal Patrol Vehicle ("PPV") program. In exchange, the Police Lodge agreed to request the withdrawal of proposed collective bargaining legislation. In 2007, MdTA officials made the decision that MdTA would not proceed with the PPV program. The Police Lodge filed suit against MdTA for breach of contract and promissory estoppel.

En route to deciding the merits of the case, COSA analyzed whether the agreement was a "procurement contract". COMAR 21.01.02.01 B (66-1) provides:

"Procurement contract" means an agreement in any form entered into by a unit for procurement.
(b) "Procurement contract" does not include:
(i) A collective bargaining agreement with an employee organization;
(ii) An agreement with a contractual employee as defined in State Personnel and Pensions Article, 1-101(e), Annotated Code of Maryland; or
(iii) A Medicaid, Judicare, or similar reimbursement contract for which law sets user or recipient eligibility and price payable by the State.
Determining whether an agreement with the government is a "procurement contract", according to the court, is a jurisdictional issue. If the contract is a procurement contract parties seeking redress must exhaust administrative remedies before the Maryland State Board of Contract Appeals. MdTA argued a procurement contract is invalid if it does not follow the procurement procedures established by State procurement law. In this case MdTA argued that the contract was for the procurement of vehicles and lobbying services, i.e., funding for personal patrol vehicles in return for certain legislative activities.

COSA determined that the agreement was not a "procurement contract" because MdTA did not actually procure vehicles. Rather, the agreement merely contemplated the procurement of vehicles. COSA relied on federal cases in drawing the distinction, noting "the hallmark of a procurement contract is a 'buyer-seller relationship.'" MdTA also asserted that the contract was a procurement contract because MdTA was procuring the Police Lodge's lobbying services regarding the collective bargaining legislation. COSA dismissed this argument as "absurd."

COSA also noted the case of State v. MSBCA and Law Offices of Peter G. Angelos, which provided that the MSBCA would initially interpret the laws establishing its jurisdiction if the question is "reasonably debatable." COSA, in this instance, did not view the procurement contract issue as debatable. There were no purchasing terms in the agreement; hence the agreement was not a procurement contract.

MdTA Police Lodge #34 of the Fraternal Order of Police, Inc. v. MdTA, No. 1855, 2010 Md. App. LEXIS 142 (2010).

 
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