Maryland Procurement Lawyer

Governor O’Malley Signs P3 Bill

On April 9, 2013, Governor Martin O’Malley signed a bill (HB560) that modifies the law concerning Public-Private Partnerships (P3s). Below are some key features of the legislation:

Disputes that arise out of P3s will remain outside the jurisdiction of the Maryland State Board of Contract Appeals (“MSBCA”). In other words, protest-like actions and claims that arise out of P3 procurements will continue to go to court, not the MSBCA;
Certain components of Maryland’s General Procurement Law will now apply to P3s. For example, the provisions dealing with Prevailing Wage (Title 17, Subtitle 2 of the State Finance and Procurement Article), Living Wage (Title 18), and Security for Construction Contracts (Title 17, Subtitle 1) will apply to P3s;
A P3 agreement may not exceed 50 years unless the Board of Public Works (“BPW”) provides authorization;
The BPW may not approve a P3 unless the procuring agency “establishes appropriate minority business enterprise participation goals and procedures” for the P3 project;
The requirements of the legislation do not apply to the University System, St. Mary’s College of Maryland, Morgan State University, or Baltimore City Community College where no State Funds are used to fund or finance any portion of a capital project;
The law, which takes effect on July 1, 2013, is intended to be prospective only and will apply only to P3s entered on or after July 1, 2013.

Filed Under: Bid Protest, Board of Contract Appeals, Board of Public Works, Claims, MBE, Uncategorized

Maryland Public Information Act (“PIA”) can serve as a valuable tool to contractors.

The PIA provides the general public with fairly broad access to government records. Savvy contractors understand that the PIA can be used to size up the competition. Before the award of a contract, a government agency may not disclose the contents of a proposal to any person other than a person responsible for the evaluation of the proposals. St. Fin. & Proc. § 13-210(d)(3); COMAR 21.06.01.02(C)(4). However, once a contract is awarded, all proposals are open to public disclosure. St. Fin. & Proc. § 13-210(b)(1)(ii); COMAR 21.06.01.02(D)(2). I encourage my clients to learn from successful contractors by requesting and reviewing copies of proposals submitted by incumbent contractors.

For general information about the PIA and the process for filing, the website of the Maryland Attorney General is a helpful resource and includes a sample PIA request letter: http://www.oag.state.md.us/opengov/index.htm. Although the process for filing a PIA request is straightforward, there are exemptions under the PIA and disputes sometimes arise regarding whether particular documents are subject to disclosure. Our firm is well positioned to litigate such issues when the need arises.

As a footnote, there are limited circumstances in which a proposal may be disclosed prior to the award of a contract. This sometimes occurs during litigation before the Maryland State Board of Contract Appeals in which the substance of the proposals is relevant to the merits of the case. Disclosure will usually be subject to a confidentiality order and review is often limited to the attorneys for the parties. Finally, there are limits on the scope of the information that you can gather regarding a competitor. An agency will not disclose parts of a proposal that it deems to contain confidential commercial or financial information. See St. Gov’t. § 10-617(d).

Filed Under: Bid Protest, Board of Contract Appeals, Uncategorized

The I-95 Travel Plazas and Public-Private Partnership Model

Chris Ryon of Kahn, Smith & Collins, P.A. was part of the litigation team that successfully defended concessionaire Areas USA MDTP, LLC (“Areas”) against a lawsuit challenging the award by the State of Maryland to Areas of a Public Private Partnership (“P3″). The P3 awarded to Areas, valued in excess of $400 million, calls for the redevelopment and long-term operation and maintenance of the two Travel Plazas along I-95, the iconic “Maryland House” in Harford County and “Chesapeake House” in Cecil County.

Travel Plaza Litigation

In the summer of 2011, the Maryland Transportation Authority (“MDTA”) issued a Request for Proposals (“RFP”) for a private partner to redevelop the two Travel Plazas. The Travel Plazas are among the busiest in the nation, with five million visitors a year, and annual food and beverage revenues of $30 to $35 million, and yearly fuel sales of 15 to 20 million gallons.

In response to the RFP, MDTA received proposals from Areas and incumbent concessionaire Host International, Inc. (“Host”). MDTA evaluated the proposals in accordance with the evaluation criteria set forth in the RFP, and selected Areas for contract award.

Host filed a protest-like lawsuit in the Circuit Court for Montgomery County on February 17, 2012 to challenge the selection of Areas. [Because the P3 procurement process did not fall under “Maryland’s General Procurement Law”, the Maryland Board of Contract Appeals did not have jurisdiction over this case.] Host alleged that the solicitation process was unfair and illegal and sought declaratory judgment and injunctive relief.

This case was ultimately transferred to the Circuit Court for Baltimore City and assigned to the Court’s Business and Technology docket. Areas and the State Defendants to the lawsuit filed separate motions to dismiss the action. On November 5, 2012, Judge Audrey Carrion issued a 59 page memorandum opinion that decided a myriad of legal issues and dismissed Host’s lawsuit in full. Host did not appeal the decision.

As the awardee of the P3, Areas, on its own dime, will spend approximately $56 million to redevelop the two Travel Plazas. Areas will lease the facilities from the State for a period of 35 years, during which time it will maintain and operate the facilities. This P3 structure will enable the Travel Plazas to be redeveloped using only private funds, which will thereby allow MDTA to reduce future operating and capital expenses, reserve its debt capacity for core business activities and generate additional revenue. The State will receive a percentage of the revenue from the concession and gas sales. If you have traveled recently along I-95, you have probably noticed that the Maryland House is closed to the public and is already under construction.

The P3 Model

While P3s have been used throughout the world and in other states for some time, Maryland is relatively new to this contracting format. As cash strapped state and local governments face deteriorating infrastructures, they are likely to expand their use of the P3 model. The P3 approach raises important legal and policy questions: When are P3s appropriate? What is a fair rate of return for the government? Should P3 procurements be subject to the laws and regulations that govern typical procurements? If so, which provisions? Kahn, Smith & Collins, P.A. will continue to follow and advise its clients on these developments.

Filed Under: Bid Protest, Board of Contract Appeals, Uncategorized

Maryland’s Little Davis-Bacon Act

The Prevailing Wage Law (Md. Code Ann., State Fin. & Proc., § 17-201 et seq.), also known as Maryland’s Little Davis-Bacon Act, requires contractors to pay a “prevailing wage” under certain State construction projects. The law applies to public works contracts in excess of $500,000 when State dollars are used to provide 50% or more of the project’s overall construction cost. The prevailing wage rates are set by Maryland’s Department of Labor, Licensing and Regulation (“DLLR”). The prevailing wage rate will vary depending on the type of work performed by the employee. For example, an employee who performs painting work would likely be owed a different prevailing wage than an employee performing electrical work.

DLLR establishes prevailing wage rates for each locality in the State (23 counties and Baltimore City). This means that the prevailing wage rates for a contract performed in Montgomery County may vary from the rates owed under a contract performed in Washington County.

In contracts where the Prevailing Wage Law applies, the solicitation will specify the wage and fringe benefit rates for each classification of worker. Contractors then bid accordingly. The law requires employees on a public works contract to be paid overtime for hours in excess of 10 hours in a single day, and for work performed on a Sunday or a legal holiday.

The law also imposes strict reporting requirements. Contractors on construction projects covered by the Prevailing Wage Law must submit certified payroll statements indicating proper worker classifications and wages for both straight time and overtime work. Certified payrolls must be submitted to the Commissioner of Labor and Industry within 14 days after the end of the payroll period.

A contractor faces serious consequences for failing to pay the proper prevailing wage. Violators may be fined $20 per day for each worker paid less than the established rate. A failure to pay the proper prevailing wage may also subject the contractor to a “suit for wages” brought by an employee, or a class of employees. A successful employee can potentially collect attorney’s fees and treble damages on top of back wages.

Kahn, Smith & Collins, P.A. has provided advice and litigated claims under Maryland’s Prevailing Wage Law. Just recently, we filed a suit for wages with the Commissioner of Labor and Industry on behalf of a class of employees. With our background in both wage and hour law and in State Procurement, we are uniquely qualified to provide advice on compliance, and to prosecute and defend claims.

Filed Under: Uncategorized

Protests and Appeals to the MSBCA

Protests arise at different stages in the procurement process. They can be submitted to the agency prior to the review of bids or proposals, during the evaluation of the bids or proposals, and even after the agency has selected a vendor for contract award. Protests are often tough to win, particularly if the agency has already reviewed the submissions and selected a contractor. However, in a situation where the solicitation specifications are defective on their face, a low bidder is not responsible, or the low bid is not responsive, a well timed protest can be the difference between winning and losing the contract.

In my experience, both as a former government lawyer and as a private practitioner who now represents contractors, most agencies are receptive to a well-timed and meritorious protest. Agencies can and should want to get it right. A prudent contractor should be ready to file a timely protest if warranted and the contractor should attempt to put its best foot forward in the protest. Indeed, a protest is much easier to win than an appeal of a protest denial to the Maryland State Board of Contract Appeals (“MSBCA”). If, for example, your company is the second lowest bidder, and you convince the agency to toss the lowest bidder’s bid, there is a good chance that you will be selected for contract award. That, of course, assumes that your bid is responsive and that you are a responsible bidder.

Appeals to the MSBCA are difficult to win because of the high degree of deference provided to agencies in the procurement selection process. The MSBCA is not a super evaluation committee charged with second guessing the agency’s selection of a contractor. When it comes to the selection of a contractor, the MSBCA will not sustain an appeal of a protest denial unless the there is a showing that the agency did not have a reasonable basis for its selection, or that the decision was arbitrary, capricious, or an abuse of discretion.

While winning an appeal is difficult, a recent decision by the MSBCA shows that it is possible. In the Appeal of The Active Network, Inc., MSBCA 2781, DHR/CALL 11-001-S (April 2012), the MSBCA sustained an appeal from the incumbent contractor. In the procurement at issue, the State of Maryland Department of Human Resources (“DHR”) issued a Request for Proposals (“RFP”) seeking toll-free call center services to assist DHR in the administration of its programs such as public assistance, child support enforcement, and foster care. After conducting a full hearing, the MSBCA concluded that DHR’s recommendation to award the contract a particular contractor was flawed and unsupported. The MSBCA described as “fatal flaws” DHR’s failure to fairly and accurately apply the RFP’s evaluation factors, making rankings that were clearly erroneous, and failing to incorporate differences of degree among the ranking orders of proposals. This was a significant victory for the incumbent contractor. Following the MSBCA’s decision, DHR decided to re-procure. On July 11, 2012, the Board of Public Works approved a $4.3 million modification to the existing contract that will extend the incumbent’s contract by one year while a new procurement is conducted.

Filed Under: Bid Protest, Board of Contract Appeals, Board of Public Works

A Challenge to an Agency’s Decision to Reject All Bids Is a Tall Task.

An agency’s decision to reject all bids and re-solicit as part of the procurement process can be extremely disappointing to the contractor that submitted the low bid or top ranked proposal. The contractor has to decide whether to devote additional time and money to submit a new bid in response to the subsequent solicitation, with no guarantee that it will be selected for award. With its initial bid on the street, the contractor faces the unfortunate prospect of bidding against itself, i.e., an “auction scenario.”

In Maryland, it is not uncommon for agencies to reject all bids. Agencies make the decision for a variety of reasons, such as a legitimate protest from another bidder, a change in economic conditions, or a mistake made by the agency in the procurement process. Unfortunately for the contractor, the standard for reviewing a rejection of all bids is extremely deferential to the State. And there is no provision in the law that allows for the reimbursement of proposal preparation expenses, even when the cancellation of the solicitation stems solely from mistakes made by the State.

In a recent decision, the Maryland State Board of Contract Appeals provided addition guidance on the legal standard for the review of an agency’s decision to reject of all bids. See STG International, Inc., MSBCA 2755 (2011). Below is a summary of the “rejection of all bids” standard as articulated in STG International. The Board’s articulation builds on Board precedent and reflects the great deference paid to State agencies under Maryland procurement law. A full copy of the Board’s decision can be accessed at its website at http://www.msbca.state.md.us/2011.html.

Summary of Legal Standard for Review of Rejection of all Bids

After bid opening or proposals are submitted, an agency may cancel the solicitation if it determines that it is “fiscally advantageous or otherwise in the best interests of the State.” MD. CODE ANN., State Fin. & Proc, § 13-206(b); COMAR 21.06.02.02C(1). Under this standard, the State retains broad discretion to decide whether to cancel a solicitation. The agency’s decision to reject all bids shall be assessed as of the date the decision is made. The Board of Contract Appeals will not disturb the agency’s decision absent a finding that the decision was not in the best interest of the State to such an extent that it was fraudulent or so arbitrary as to constitute a breach of trust.

As part of the analysis, the Board of Contract Appeals will consider evidence of the likelihood that the Board of Public Works will approve the contract. Indeed, the Board of Contract Appeals does not have the authority to order the Board of Public Works to approve the award of a contract.

According to the Board of Contract Appeals, cancellation of a solicitation is highly disfavored practice because it wastes the time and money of the contractors and has the potential to discourage future competition. In theory, there may be factual scenarios where prejudice to bidders and harm to the competitive process outweighs the agency’s interest in re-solicitation. Thus far, however, such a scenario has not played out before the Board of Contract Appeals.

Filed Under: Bid Protest, Board of Public Works

Zimmer Decision

[Please note that following the decision of the Court of Special Appeals in Zimmer, COMAR 21.11.03.14 was repealed. As a result, MBE-related bid protest appeals may be filed.]

In a reported decision dated May 27, 2011, the Maryland Court of Special Appeals issued a significant decision regarding a contractor’s right to file a bid protest related to the Minority Business Enterprise (“MBE”) program. Salisbury University v. Zimmer, No. 462, Sept. Term 2010.

Since 2004, the Maryland State Board of Contract Appeals (“Board”) has dismissed MBE-related bid protest appeals for lack of jurisdiction under COMAR 21.11.03.14, a regulation that prohibits protests concerning acts or omissions related to the MBE program. See Knott Constr. Co., 6 MSBCA ¶ 555 (2004); Snake River Land Co., Inc., MSBCA 2539, __ MSBCA ¶__ (Sept. 12, 2006); Waynesboro Constr. Co., Inc., 2600 & 2605, __ MSBCA ¶ __ (Nov.7, 2008). The Board’s refusal to hear MBE related bid protest appeals led to confusion. It raised questions over the finality of agency decisions, and the appropriate legal mechanism to challenge MBE-related determinations. Contractors began to file protest-like lawsuits in circuit courts throughout the state. To the frustration of state agencies, this contributed to blatant forum shopping.

In Zimmer, the University appealed a circuit court’s decision that reversed a Board determination that it lacked jurisdiction to hear an MBE related bid protest appeal. The Court of Special Appeals addressed whether COMAR 21.11.03.14 is invalid because it conflicts with Maryland Code (2009 Repl. Vol.), §§ 15-215 and 15-217 of the State Finance & Procurement Article.

The Court of Special Appeals answered in the affirmative. It held that COMAR 21.11.03.14 violates the plain language of §§ 15-215 and 15-217, and is therefore invalid. The Court determined §§ 15-215 and 15-217 “grant contractors aggrieved by agency MBE decisions the right to submit bid protests; the regulation prohibits them from doing so. The statutory provisions trump the regulation.”

If this decision stands, Contractors will have a clear path to protest an agency’s MBE-related decision. If the protest is denied by the agency, the Contractor may appeal to the Board of Contract Appeals, a more familiar and predictable forum.

Filed Under: Bid Protest, MBE

Debriefing

You are not happy. You put a lot of money and countless hours into responding to the Request for Proposals only to have your proposal rejected. The rejection can be tough to swallow. Few view the rejection as a potential “lessons learned” opportunity. But it can be. Odds are this will not be the last time you compete for a government contract. So it is critical that you conduct a productive evaluation of what went wrong, and how to improve.

A debriefing should be part of this evaluation process. A debriefing provides the opportunity to meet directly with the agency’s procurement representative(s) to learn how your proposal was evaluated. It can also provide information regarding a potential protest.

Under Maryland procurement law, “[w]hen a contract is to be awarded on some basis other than price alone, unsuccessful offerors may submit a written request for a debriefing to the procurement officer within a reasonable time.” COMAR 21.05.03.06. The debriefing is to be held at the earliest feasible time after the procurement officer receives a request for a debriefing and before the contract is awarded. The debriefing is to be conducted by a procurement official familiar with the rationale for the selection decision. The debriefing provides the contractor with information concerning how the proposal was evaluated, and in particular, areas in which the unsuccessful offeror’s technical proposal was deemed weak or deficient. There are limits to the scope of a debriefing. The debriefing may not include discussion or dissemination of the thoughts, notes, or rankings of individual members of an evaluation committee. The debriefing is limited to discussion of the unsuccessful offeror’s proposal and may not include specific discussion of a competing offeror’s proposal (including the selected awardee).

At the debriefing, the contractor should strive to learn as much as possible regarding why the procurement agency downgraded its proposal. It should also assess whether the agency evaluated proposals in a manner consistent with the terms of the solicitation.

Whether to bring an attorney to the debriefing is an interesting question. There are different schools of thought on this issue. Bringing a lawyer to a debriefing can put the agency on the defensive. It can potentially limit the flow of information, and thereby make the debriefing less informative. However, an attorney knowledgeable in Maryland Procurement law can detect potential grounds for protest, and the mere presence of an attorney sometimes encourages the agency to further scrutinize the manner in which it evaluated proposals. Ultimately, the decision whether to bring an attorney is a judgment call that should be based on the individual circumstances of the procurement.

Filed Under: Bid Protest, Uncategorized

New Law Eliminates Minority Business Enterprise Subgoals

[Please note: The MBE Subgoal Directive and Guidelines can accessed at GOMA's website (www.mdminoritybusiness.com)]

HB 456 (cross filed with SB 120) passed in both the House of Delegates and State Senate, and was signed by the Governor O’Malley on May 10, 2011. This legislation, which will become effective July 1, 2011, repeals the “requirement” that state agencies structure their procurements to seek to award 7 percent and 10 percent of a unit’s total dollar value of contracts to African American-owned and women-owned businesses respectively. The law maintains the existing public policy of the State of Maryland that agencies make a concerted effort to achieve an overall MBE goal of 25 percent. The new law also requires the Governor’s Office of Minority Affairs (“GOMA”) to establish guidelines for agencies to consider in determining whether to establish possible sub-goals.

Filed Under: MBE

Voluntary Dismissal of Legal Challenge to Maryland MBE Law

Maryland faced a legal challenge to the constitutionality of its Minority Business Enterprise (“MBE”) program. The case of Kline v. Swaim-Staley, case number 1:08-cv-03197-ELH, was before the United States District Court for the District of Maryland. In Kline, the contractor submitted the low bid on a multi-million dollar construction project with the State Highway Administration, a unit of the Maryland Department of Transportation (MDOT). Kline’s bid was lower by over a million dollars, but Kline only promised 10.8% MBE participation, which was far short of the 30% MBE goal provided in the solicitation. The State denied the waiver request. Kline filed a lawsuit that challenged the constitutionality of Maryland’s MBE law. The Kline case had the potential to impact future State of Maryland procurements. However, in mid-April, Kline and MDOT filed a stipulation of dismissal. The dismissal ends this litigation.

The Kline case had been closely followed, particularly in light of the recent Fourth Circuit Court of Appeals decision that partially overturned North Carolina’s minority/female contracting statute. H.B. Rowe Co., Inc. v. Tippett, 4th Circuit No. 09-1050 (July 22, 2010). The Fourth Circuit applied the strict scrutiny standard and affirmed the constitutionality of the statutory provisions for African American and Native American subcontractors. In other words, the Court held that the statutory preferences for African American and Native American contractors are legal because they are narrowly tailored to achieve a compelling government interest. However, the Court held that the State had failed to justify its application of the statutory scheme to women, Asian American, and Hispanic American subcontractors.