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Friday, September 23, 2016

Sole searching in Oakland, CA?

Courthouse News Service, which is a nationwide news service for lawyers and the news media, filed the following story. This shortened version is intended to alert you to the item and tease you to go to the sourced link and read it in full. Especially since I cut, paste, omit, edit, rearrange and paraphrase to suit the educational content and intent of this blawg; so you must read the original and not take my version of it as true, complete or accurate.

Oakland Playing Fast & Loose With Contracts, Bidders Say
Competitive bidding is meant to secure the lowest price for a project by creating competition and ensuring contracts don't go to pre-selected firms. So when an agency wants to sole-source a contract, it must justify the move internally and get it approved. If that doesn't happen, officials can use sole-sourcing to steer contracts to favored firms and exclude cheaper bidders — raising project costs that taxpayers ultimately pay.

"They're trying to convert the process from a shield-bidding process to a negotiation process and at the federal level, it's not appropriate," said Steve Sorret, an attorney with Kutak Rock in Washington and a former curriculum director for The George Washington University Law School's government contracts program. "What they're doing here certainly goes against the grain of a typical public contracting process."

In a city known for awarding fraudulent contracts, routinely sole-sourcing its projects signals entrenched problems in the way Oakland does business, and in how that affects residents. The City Council currently faces findings by the Alameda County Grand Jury that it improperly awarded a $1.5 billion trash collection contract to an unqualified recycler. The 2014 deal sent garbage collection fees skyrocketing, prompting a group of Oakland landlords to sue the city earlier this year.

And in a 2013 report, the city auditor blasted councilmembers Desley Brooks and Larry Reid for breaking the law by steering part of a $2 million contract for demolition work at the former Oakland Army Base to a friend's company after the city had already begun negotiating with another contractor. Those initial negotiations, too, were illegitimate since municipal law requires the contract to go up for competitive bids first. Brooks also negotiated three separate contracts for a teen center in East Oakland, something only the city administrator can do.

Emboldened by high-ranking officials willing to look the other way when councilmembers break the law, the Oakland City Council routinely waives its legally mandated competitive bid requirement for awarding construction contracts worth more than $50,000 and negotiates the contracts directly with firms of its choice, according to a report by the city auditor.

The council simply relies on a statute allowing it to reject bids it deems invalid — or "nonresponsive." And at a City Council meeting on Tuesday, it blessed another competitive bid waiver, this time for the $400,000 renovation of the Dimond Branch library in East Oakland. Instead, the city will approach construction firms and negotiate with them one-on-one in a process known as sole-source contracting.

But falling short of small business goals and bidding over the project price don't render a bid nonresponsive. If a bidder fulfills all of the requirements for submitting the bid, they are by definition responsive and both Greentech and Wickman satisfied those requirements.

Jonathan Wickman says the city violated its own laws in deeming his firm's proposal nonresponsive so it could justify moving to direct negotiations. "That doesn't seem legal to me," Wickman said. "They should rebid it or find more money and rebid with more money in the budget. It's not like they're left with no avenue."

Thursday, September 1, 2016

For-proift out of state company beats non-profit in state organizations to fountain of youth services funding

Youth services providers protest bidding process
Two Arkansas companies that operate seven Youth Services Division facilities submitted protests Friday to the state’s intention to award a contract to run the facilities to an out-of-state company that has said it will charge the state more than the current operators charge. Bidders have 14 days to submit a protest after learning of an alleged flaw in the process.

Every seven years, the state is required to seek proposals from organizations interested in operating the juvenile treatment and juvenile offender facilities. Department of Human Services spokeswoman Amy Webb said it has been eight years since bids were taken because of a previous one-year extension. Youth Opportunity Investments of Carmel, Ind., proposed charging the state $232 per bed per day, up from the $147 the state pays now per day for each of the 249 beds in the facilities.

Sen. Terry Rice, R-Waldron, whose district includes the Mansfield facilities, said Friday he has “a great deal of concern” about the plan to switch to an out-of-state provider at greater cost to the state. The current operators “have not received a dime’s increase in three years,” he said.

Sen. Stephanie Flowers, D-Pine Bluff, chairman of the Senate Children and Youth Committee, also said she has questions. “A lot of the intake providers have been asking for more money for years and we haven’t given it to them. It seems quite odd to have an out-of-state contract and offer them more money,” she said.
2 protest youth services contract; ‘robbed’ of fair shot, current operator’s letter to state says
Two nonprofits running seven Arkansas juvenile treatment and detention centers say state officials failed to document why a for-profit, out-of-state company will replace them, even though the new company's bid was more expensive.

Both Consolidated Youth Services Inc. and South Arkansas Youth Services, which have operated the centers for more than a decade, are challenging the decision. The operators are mostly concerned with how their proposals and Youth Opportunity's were reviewed and the quality of the new company's youth services program.

"They robbed the entire bidding process of equity," state Sen. Jeremy Hutchinson* wrote in a protest letter on behalf of South Arkansas Youth Services. The director of the Department of Human Services is currently drafting a "formal written response" to both organizations, Amy Webb, a department spokesman, said Monday.

In its protest letter, Consolidated Youth Services stated it held "no assurances" that the selection process was consistent. The state agencies did not provide individual score sheets used by evaluators to show how they weighed the proposals in each technical category and only a cumulative score was available, according to both nonprofits' letters. Evaluators appeared to have little experience in the youth services field, and there was no proof they attended training beforehand, the letters said.

Consolidated Youth Services' letter, written by attorney Debby Thetford Nye, called for a new evaluation -- one "untainted by significant procedural deficiencies and bias."

Both nonprofits said that Youth Services Division officials held post-bid discussions with Youth Opportunities Investments, even though post-bid conversations can disqualify vendors competing for a contract. The new company was also permitted to change its proposal and circumvent the criteria laid out in the state's request for services, the current contractors said.

Leaders of the Arkansas-based organizations say their programs cost less, strengthen communities and do not slash services. "We are a community program," said Jerry Walsh, chief executive officer of Magnolia-based South Arkansas Youth Services. His organization runs the Dermott Juvenile Correctional Facility and juvenile treatment centers in Dermott and Mansfield. "We know how to approach the community and how to work with them and to get them to support the program."

Youth Opportunities Investments plans to hire subcontractors from Louisiana and Nashville, Tenn., to carry out services, according to its proposal. The Youth Opportunities plan appears to dedicate fewer staff members to special education, GED and technical-vocational coursework and relies more on online learning, Walsh said.

"There is nothing in their proposal to suggest they would enhance the program," said Bonnie Boon, executive director of Jonesboro-based Consolidated Youth Services. Boon also said that she found the state's ability to find the extra dollars for the increase under the new company "curious."

Youth-services advocates have asked for additional funds for years, which Boon and Walsh said has been frustrating.

"It says a lot about their financial management and not funding youth services. Now all of a sudden you're throwing tons of money in this? Unbelievable," Walsh said.

An irresponsible determination of nonresponsibility?

Baltimore painting company sues Delaware River Port Authority over Commodore Barry Bridge bid contract
A Baltimore company has initiated legal action in a New Jersey federal court, claiming they were passed over by the Delaware River Port Authority of Pennsylvania and New Jersey (DRPA) as the lowest bidder for a $17 million contract to paint the Commodore Barry Bridge. According to a lawsuit filed by The Alpha Painting & Construction Company, Inc., DRPA “wrongfully deemed the lowest bidder ‘not responsible’ and is in the process of awarding the [bridge painting] contract to a higher bidder.”

On May 5, the DRPA first put out invitations for bids to paint the Pennsylvania Approach Spans of the Commodore Barry Bridge, which allows for travel over the Delaware River from Bridgeport, N.J. to Chester, Penn. Alpha submitted a bid for this project on June 16 in the amount of $17,886,000, which conformed to the project’s bid specifications and rendered it the lowest bidder for the project, according to the lawsuit. DRPA decided to award the bid contract to Corcon, Inc. – whose original bid clocked in at a price roughly $10.2 million more than Alpha’s.

Amy L. Ash, Acting Manager of Contract Administration for DRPA, declared that DRPA had conducted an ‘investigation’ of Alpha’s bid and found that Alpha had ‘not submitted an OSHA Form 300 or otherwise detailed workplace incidents over the past three years and the applicable Experience Modification Factors,” according to Alpha’s lawsuit.

Alpha claimed DRPA “willfully ignored the merits of the low bidder’s protest, and refused to hold a hearing on the disputed factual issues regarding this procurement, despite multiple requests to conduct such a hearing.” Alpha alleged DRPA declared Alpha ‘not responsible’ for failure to supply the documents, and rejected Alpha’s bid. The Aug. 4 Denial Letter noted that through the course of DRPA’s ‘investigation,’ it had allegedly ‘contacted Alpha’s insurance broker, Beverly Annunziatta of HMS Insurance Associates, Inc., on July 8, 2016’ and ‘offered Ms. Annunziatta an opportunity to supplement the accident experience information attached to Alpha’s bid submission, but she did not do so,” per the lawsuit.

Alpha disagreed with this contention, saying it had provided said information and pointed out DRPA never revealed what constituted its “investigation” of the bid, nor contacted it regarding any such investigation in the first place. When Alpha protested this result, the company says DRPA “denied it a hearing to resolve the outstanding factual discrepancies. DRPA contended, “DRPA was not required to make its responsibility determination within 10 business days, nor is DRPA required to hold a hearing in the event of a protest of that determination. Accordingly, Alpha’s request for a hearing is denied.”
Now, I have taken these bits and pieces from the article, paraphrased and probably distorted them to create a hypothetical case for consideration of how one might view this situation from the standpoint of Guam's procurement law, which is heavily filtered through the provisions of the ABA Model Procurement Code.

In this context: Would Alpha have the right to protest the rejection of the bid on the ground that the bidder was determined to be non-responsible? Clearly, yes.

The ABA Model Code allows any bidder who may be aggrieved to file a protest, and that protest, if not resolved mutually before adversarial processes begin, would be entitled to a hearing administratively, followed by judicial review as a matter of right. (See for starters ABA MPC §9-101, Guam 5 GCA § 5425)

But was Alpha properly determined to be non-responsible? That is a question of judgment, ultimately, and the person making that judgment is generally give a lot of latitude in making the judgment call. That said, the process of coming to that judgment must be fair and equitable under basic principles of procurement. (See ABA MPC § 1-101 and Guam 5 GCA § 5001, as well as 5 GCA § 5003: "This Chapter requires all parties involved in the negotiation, performance, or administration of territorial contracts to act in good faith.")

Under the ABA MPC and Guam's version of it, a determination of responsibility contemplates that the contract officer will conduct an inquiry. "The unreasonable failure of a bidder or offeror to promptly supply information in connection with an inquiry with respect to responsibility may be grounds for a determination of nonresponsibility...." Also the implementing regulations of both codes describe one of the many standards of responsibility as whether the prospective bidder has "supplied all necessary information in connection with the inquiry concerning responsibility".

Recognizing that the article above likely is not a true and completely accurate statement of facts in this case, but sticking to the hypothetical theme here, the only inquiry conducted was not with the bidder, but rather with a third party, and the question asked of that third party hardly fully answered the question whether Alpha's "satisfactory record of performance" was adequate.  Particularly when it is understood that even if there were some OSHA claims made as confirmed by the insurance broker, there is no indication of the severity, quantity or other circumstances of the claims. Thus, it would appear that the judgment of nonresponsibility was made without any reasonable basis or any effective inquiry.

If you have any interest in the real story and the other issues raised in it, read it at the link above.

Monday, August 29, 2016

Transparency? You can't handle the transparency!

 NOTE: As usual, I have have changed the articles reported below, leaving material out, rearranging, and paraphrasing, to suit the purposes of this blawg. The obvious purpose here is the need to have adequate and effective transparency regimes in order to have and maintain good governance, in procurement as well as other aspects of government. You must read the full articles at the links to get the accurate version of the story.

Americans pay millions to whistleblower at BHP; we hound them out of their jobs
In Australia, those who flag corruption inside companies receive limited or no protection and are often sacked or mistreated, while in the United States, which paid for evidence that exposed alleged bribery by BHP Billiton, whistleblowers are encouraged to come forward. The calls for reform are being made as Fairfax Media can reveal new details of another whistleblower case that suggests serious ethical failings by a top Australian businesswoman and ABC board member, Kirstin Ferguson.

A Fair Work Commission complaint filed by the whistleblower alleges he was "victimised as a result of the disclosures" he made to Dr Ferguson about alleged corruption at mining services giant Thiess. Dr Ferguson is a director at Thiess' parent company, Leighton Holdings (now named CIMIC), and is responsible for company ethics as ethics committee chairwoman. Dr Ferguson declined to comment on detailed questions sent to her by Fairfax Media.

Key MPs Nick Xenophon, Jacqui Lambie and Andrew Wilkie, as well as the Greens and shadow attorney-general Mark Dreyfus have all said they will push in Parliament for stronger whistleblower laws to encourage reporting of corporate corruption.

In May, the US corporate watchdog, the Securities and Exchange Commission, revealed it would pay a bounty "to a company employee whose tip bolstered an ongoing investigation with additional evidence of wrongdoing". Legal sources have confirmed that the whistleblower was a BHP Billiton insider, paid US$3.75 million (about $4.96 million). The former employee provided detailed information to US investigators about the mining firm's activities overseas several years ago. The allegations remain the subject of an active Australian Federal Police bribery investigation.

It is the first time an employee of an Australian company has received a US whistleblower bounty. Under the US Sarbanes-Oxley Act, the SEC can reward whistleblowers by giving them a cut of a fine extracted from a company, with payouts often reaching many millions of dollars.

In May 2015, BHP Billiton agreed to pay $US25 million to the SEC to settle an inquiry into trips to the Beijing Olympics that the company gave to government officials. The officials represented countries where the miner was operating, and where it was sometimes seeking government permits. BHP Billiton said in a statement that, during that inquiry, the SEC had made no findings of bribery or corrupt intent against the company, and that the US Department of Justice had investigated but took no action. The company said it was not aware of the involvement of any whistleblower as part of either investigation. "We respect and fully support protections for all whistleblowers, and the importance of providing confidential avenues for reporting," the statement said.

Senator Lambie, who has taken up the cause of a Defence Department whistleblower, said she wanted "world's best practice" whistleblower laws which would "strengthen our democracy, prevent and uncover official corruption, decrease government waste, save lives, money and prevent damage to our environment".

Shadow attorney-general Mark Dreyfus said private sector employees should enjoy the same whistleblower protection as people in the public sector because their information is "just as valuable to our community, and they should not be treated differently under the law".

"Recently a string of brave private sector whistleblowers have come forward with valuable information, including those who have exposed wrongdoing in our banking sector. They deserve our protection," Mr Dreyfus said.

Mr Day says there was merit in compensating whistleblowers, although he cautioned against aspects of the US scheme. Senator Nick Xenophon has told Fairfax Media that "whistleblowers in the US get rewarded and protected, but here they get punished and ruined". Andrew Wilkie, who was recently elected as an independent MP in Tasmania, said Australia had a cultural problem in which whistleblowers were scorned as untrustworthy dobbers, or unhinged: "In the US whistleblowers are celebrated, but in Australia they're often vilified," he said.

"Greater whistleblower protection is one of the building blocks of a healthy democracy and ... of a healthy corporate culture."

ASIC executive Warren Day believes new whistleblowing laws could provide far greater clarity and protection for employees who wanted to report a range of misconduct, spanning financial crime and environmental or health and safety breaches although he cautioned against aspects of the US scheme. Minister for Financial Services Kelly O'Dwyer said the government was looking at strengthening Australia's corporate whistleblower regime. Minister O'Dwyer said that, as it looked to strengthen legislation, the government would "follow usual process, and will consult publicly".
The 'naively noble' man who could not get his voice heard
The words, coming from the chairwoman of the board's ethics committee, were intended to be reassuring: "I'm really glad to have you in that role. I really am," she said. Dr Kirstin Ferguson was speaking to "David" (not his real name) who for more than two years had been working to stamp out alleged corruption and misconduct within his company. David was suffering stress and anxiety because he feared - with good reason - that his boss was cutting him loose.

David's faith in his company was first shaken in November 2011. As one of Thiess' more senior figures, David came across a document, signed by his boss Bruce Munro more than three years earlier, as part of the company's 2008 tender for a $5.5 billion mining concession in India.

It quickly became clear that the deal might have had at its heart a corrupt arrangement. Documents and key emails suggested that Thiess' business partner in India would be paying $12 million to powerful Indian government officials - an apparently illegal payment under Australian law.

But two weeks after speaking to her, Ferguson's reassurances meant nothing. David was given three months' notice and told to go immediately on "garden leave".

The company was Thiess, part of Leighton group, which has been implicated in among the most serious foreign bribery and corruption cases in recent Australian history. David's boss was then Thiess managing director Bruce Munro, who later left the company under a cloud.

As for the ethics committee chairwoman, Dr Ferguson: she is still there, and still in the top integrity role at the firm, since renamed CIMIC. She has since scored one of the most high-profile jobs in Australia - she was appointed by the Coalition government as a director of the ABC board, where she is a member of its audit and risk committee, the body in charge of overseeing ethical behaviour.

David declined to speak to Fairfax Media, but his full story can now be told for the first time through documents held by Thiess and CIMIC, and leaked by a source close to both firms.

In the United States, someone who came forward with information about corporate malfeasance might be paid millions of dollars. In Australia, speaking out is a shortcut to dismissal, despair and unemployment. And so far in this country, whistleblowers cannot even console themselves that the bad guys will be held to account for the deeds exposed, given the difficulty often facing police or the corporate regulator in investigating, prosecuting and punishing large companies.

Inside Leighton, some were concerned the company might have a deep ethical problem. So a new confidential internal review, Project Mango, was ordered into whether Leighton might be exposed to corruption issues elsewhere. It turned up about 100 payments made by Thiess employees in Indonesia to the country's government, military and policing officials. Not everyone appreciated the revelation.

David's boss was then Thiess managing director Bruce Munro, who later left the company under a cloud. Munro was concerned that risk and compliance activities were cramping the style of those whose job it was to win contracts in difficult markets.

"I want you to ... have a look and tell them [senior management] that there is nothing to see here ... We are tying people up in paperwork. Our processes have gone too far".

In court documents linked to the whistleblower's case, it's alleged that Munro explained to the whistleblower that the sticklers for good process inside the firm would have "never let me sign it [a deal with the Indian partner]". Alarmed at what he had seen, David escalated the emails and Leighton senior management ordered an external investigation. It was codenamed "Project Orange."

When the Project Orange investigation was completed, it suggested Leighton may need to inform the Australian Stock Exchange of a foreign bribery matter. Munro had breached the company's code of ethics and internal policies, the report found. However, there was not yet enough evidence for criminal charges.

n March 2014, as Project Mango was underway, Leighton was taken over by a Spanish group and eventually renamed CIMIC. But if anyone hoped the change of management would lead to a more open culture, those hopes were quickly snuffed. The senior executives who had commissioned Project Mango were sacked and the new bosses wanted it shut down. The story about the payments to Indonesian soldiers was reported, via a leak, in Fairfax Media. But instead of performing a mea culpa, an internal witch hunt for the leakers began.

After that, precisely nothing happened. The market was not informed. Munro kept his job.

In July 2014, Dr Kirstin Ferguson, a former flight lieutenant in the air force, an expert in safety, a lawyer, a PhD in corporate governance and a professional company director, became the head of CIMIC's ethics committee.

Two weeks after her appointment, David rang her. He wanted to meet for coffee. He asked if she knew about what had happened in India, if she was aware of Project Orange. "If I were in your position, I would want to know this," he said of the "biggest ethical issue the company has and would be the biggest ever in Australia."

"I do. I really do," she replied, adding reassuringly: "I'm really glad that we have you in that role."

But a fortnight later, David received a call from the "manager of people" at CIMIC. He was told he "hasn't made it in the restructure". He'd lost his job, and was sent immediately on three months gardening leave.

Two days later, Dr Ferguson sent David a text. To a person humiliated, isolated and sacked for trying to report wrongdoing in front of him, the message rubbed salt into his wounds.

"Hi - just wanted to let you know I have been following up on your call and will be sure to call you when done," Dr Ferguson wrote. It might take another couple of weeks, she said.

David's lawyers later argued his conversation with Ferguson should have been a "protected disclosure" under Australia's flawed whistleblower regime.

Friday, August 19, 2016

The art of the protest - Procurement controversy series, Miami, Florida

Art dealer files protest in Miami Dade College project
Miami art dealer Gary Nader has filed a bid protest against Miami Dade College after losing out on a multi-million dollar development project on campus, according to paperwork obtained by on Sunday. The college, which wouldn’t front any money, would give away the development rights and later get to operate the “cultural centers.”

The idea for the project began as Nader’s own unsolicited pitch to the school last May: To build a world-class Latin American art museum with his family’s name on it, which he would start up with $60 million worth of pieces from his own collection. The project has since grown into a mélange of uses because the college soon grew more interested in having a theater and conference center. Related’s plan more than halves the size of the museum that Nader had first proposed. All of the proposals include luxury residential condo towers to be sold to offset the costs of the cultural parts of the development.

Among its many allegations, the 49-page protest says winning bidder and Nader’s nemesis—developer Jorge Pérez, CEO of Related Group—lowballed the college more than $100 million in an “exceedingly low valuation” of the eventual development, which would be a public-private partnership. Nader’s protest also says the college has so far failed to respond to his lawyers’ public records requests for documents related to the review and selection process.

The protest also alleges a conflict of interest by attorney Al Dotson with the South Florida law firm of Bilzin Sumberg. Dotson, it says, advised Miami Dade College during the development bidding process but also worked for Related on a separate affordable housing project before the Miami-Dade County Commission.

The document also complains of inappropriate contacts between a Related executive and a lawyer advising the college despite a communications blackout between bidders and school officials, known as a “cone of silence.” “The evidence shows that the college promoted favoritism throughout the solicitation process,” it says. “…The ‘cone of silence’ was a moving target that continued to change, for no other reason, than to support favoritism.”

The protest document asks that all action toward the project stop until the dispute is resolved. It seeks a re-evaluation of all proposals by an “impartial evaluation committee.”
Fight over Miami Dade College’s cultural center takes more legal twists
Friday’s challenge came after weeks of legal wrangling over the price of a required protest bond and public records related to an internal college investigation.

(See prior post)
Art Dealer Gary Nader Butts Heads With ‘Condo King’ Jorge Perez Over Bid for New Miami Museum
It's a heated and highly personal battle.

It’s safe to assume that Miami art dealer Gary Nader thought his pitch to Miami Dade College for a multi-million-dollar campus development, including a 90,000-square-foot museum of Latin American art with $60 million worth of work from his own collection, would be welcomed with open arms. The proposal reportedly didn’t even require the school to put up any money; it would take ownership of the culture center in exchange for giving over a parking lot.

But when college officials—citing their status as a public institution—opened up the potential development to other proposals, and then gave top ranking to a rival bid from real estate firm Related, run by Miami “condo king” Jorge Perez of the Perez Art Museum Miami, Nader struck back. His limited partnership Nader + Museu filed a detailed 49-page formal “protest bid” on August 12, which contains nearly 400 pages of accompanying exhibits directed at Miami Dade College purchasing department, opposing an agreement with Related.

The papers claim that the agreement “failed to comply with requirements for a public-private partnership, repeatedly violated the express terms and conditions of this solicitation and offered an exceeding low valuation for the right to develop private improvements on College owned land…” It notes a $158.5 million difference between “the first and second highest ranked proposers,” calling it “astounding.” (See, Abnormally low vs unreasonably low bid)

William Riley, an attorney for Nader, told artnet News via email that there is “a statutorily prescribed opportunity to resolve the protest by mutual agreement between the parties within 7 business days after receipt of the formal written protest” filed on August 12. “We have notified the college that we are available to speak and/or meet within this timeframe. They have not responded to us.”

Monday, August 15, 2016

Need to post a $2.3 million bond in order to file a bid protest??

Fight over Miami Dade College’s cultural center takes more legal twists
a development team led by art dealer Gary Nader filed an official protest Friday challenging a recommendation that Miami Dade College’s board of trustees partner with condo king Related Group on a project to build a cultural center and residential towers downtown, perhaps foreshadowing a long legal battle over the project.

Nader’s attorneys notified the college three weeks ago of their plans to protest a college committee’s decision to score Related Group the highest among three competitors, including Nader. But unexpectedly, Friday’s challenge came after weeks of legal wrangling over the price of a required protest bond and public records related to an internal college investigation.

Last month, Nader + Museu LLP fended off the college’s arguments that the development team would need to post a $2.3 million bond in order to file a bid protest. A Miami-Dade judge allowed Nader’s team to move forward, at least temporarily, with the posting of a $100,000 injunction bond. Then on Thursday, Judge Monica Gordo rejected the college’s request to dissolve the emergency injunction
Hmmmm. The headline to this story may have been a smidgen misleading. This case, which may have begun as a protest, made its way to court where an injunction was sought. Evidently, there was no continuing automatic or other administrative stay in place.

It is common practice, when seeking injunctive relief, for a court to require posting of a bond to compensate a defendant for delay damages IF the plaintiff does not prevail on its underlying claim for damages or relief. Characterizing such a bond as a "protest bond" is perhaps misleading.

But the mere thought of a $2.3 million, let alone a $100,000 bond requirement to lodge a bid protest certainly woke me up this morning.

Friday, August 12, 2016

Outsourcing pre-judicial review of administrative processing

The following article, and the case which it reports, is not exactly about procurement. It does, though, inform the discussion about how to determine which activities of a government are legislatively determined to be governmental functions that must be performed by the government. The function in controversy here is the initial review of a contested parking ticket.

The article bringing this to light was flagged by the State Bar of California's Daily News Digest August 12, 2016, and appeared on NBC Los Angeles News online.

City of Los Angeles Ordered to Change Parking Ticket Dispute Process
The California Court of Appeal has ordered the City of Los Angeles to change the way it handles parking ticket disputes. A three-judge panel said the city can no longer outsource the handling of the initial reviews of parking tickets requested by motorists, but must do those reviews themselves. The appeals court’s decision, handed down this week, says the state vehicle code requires cities, not outside contractors, to conduct all initial reviews of parking tickets.
The case is Weiss v. City of Los Angeles. Pieces of the case reflected below are my own editorializing, and cut, rearranged, left out, paraphrased and otherwise altered and (mis)construed, as is my practice in this blawg. Thus, you are better served by reading the case in its entirely at the link.
In this appeal by the City of Los Angeles (City) and Xerox Business Services, Inc. (Xerox,) we consider whether the City, as the “issuing agency” for notice of parking violations in the City, must conduct the “initial review” of challenged citations, or whether it may delegate that duty to Xerox, its “processing agency”. [The decision in the case required interpretation of the complex statutory scheme, which had evolved over time. As is the case with many such statutory evolutions, some genes change, some stay the same and some just disappear, making the interpretation process more complex than a simple reading of a single statute might suggest.]

Weiss got a parking ticket, which he contested. After an initial review performed by Xerox, Weiss received a letter advising him that an initial review had been performed and the citation would not be cancelled. [There followed a round-about means of getting the issue before the court, interesting for those studying writs of mandate, standing and the like, but not germane to this post, which is more about the question, how to determine if a particular governmental function can to delegated to a private contractor. Thus, I limit the discussion here to:"Weiss’ claim that the initial review process, as currently constituted, did not comply with the statutory obligations of the initial review under the Vehicle Code".] Since 1985, the City has contracted with Xerox to act as its processing agency. As part of Xerox’s processing duties, the City delegates the duty to conduct the initial review of contested citations. Xerox is paid based on the number of parking citations processed per month, but does not receive additional compensation to conduct initial reviews. Xerox performs the initial reviews through its Parking Violations Bureau (Bureau), which is staffed by a subcontractor. In fiscal year 2013, Xerox conducted 135,291 initial reviews [constituting about 5% of citations processed].

The initial review is conducted by Bureau clerks, who must adhere to 46 Business Processing Rules (BPR), drafted by the City (or by Xerox and approved by the City). When considering a contested citation, the Bureau clerk refers to the applicable BPR, if any; if that BPR permits dismissal of a citation, the clerk dismisses it. If no BPR addresses the particular challenge, but a motorist has presented sufficient evidence to overcome a citation, clerks are instructed to refer the matter to a supervisor for a decision. The motorist learns the result of the initial review through one of 97 form letters drafted and approved by the City, on City letterhead, sent to the motorist by Xerox.

The trial court below concluded that, setting aside the issue whether Xerox was authorized to conduct the initial review, the City’s system of initial review complied with the Vehicle Code requirements in the scope of the review, in the fairness of its procedure to the motorist, and in the fairness of its substantive decision-making process.

The question at issue in this appeal [and this post] is whether the state vehicle code requires that the City, as the issuing agency, conduct the initial review, rather than its processing agency, Xerox. In its ruling, the court below reviewed the statutory framework, its legislative history (including pertinent existing, amended and repealed Vehicle Code sections), and case law. Conceding that the question was close, the court concluded that legislative changes in 1995 to the statutory scheme reflected the Legislature’s intent to place a nondelegable duty to perform the initial review on the City, the public agency that issues parking citations.

The 1993 revision maintained the prior definition of a “processing agency”; ‘processing agency’ means the contracting party responsible for the processing of the notices of parking violations and notices of delinquent parking violations. It also contained an amended version of section 40200.5, which preserved the issuing agency’s authority to contract with a processing agency (“an issuing agency may elect to contract with the county, with a private vendor, or [others] . . . for the processing of notices of parking violations and notices of delinquent parking violations....

Prior to the 1995 revisions, the legislation allowed an issuing agency to contract with a processing agency for the processing of notices of parking violations, including investigating the circumstances of the citation and conducting the initial review as well as giving the processing agency the authority to make the decision whether to cancel the citation.

The 1995 revisions repealed the previous statutes which had expressly provided that the processing agency may conduct initial reviews, and gave the processing agency the authority to investigate challenged citations. It enacted a new provisions assigning responsibility for conducting the initial review to the “issuing agency,” giving that agency the authority to determine whether to cancel the citation, and requiring it to inform the processing agency of its decision, further eliminating any reference to the authority of the “processing agency” to conduct the initial review.

Legislative deletion of an express statutory provision “‘is presumed to effect a substantial change in the law’ [citation].” (Barajas v. City of Anaheim (1993) 15 Cal.App.4th 1808, 1814.) Considered in their entirety, the 1995 changes strongly suggest that by repealing section 40200.7 and former section 40215, and replacing them with a new section 40215, the Legislature intended to give sole authority to conduct the initial review to the issuing agency, and to preclude delegation of that duty to the processing agency. No other rational explanation comports with the breadth of the modifications eliminating references to the processing agency’s authority.

But, the 1995 revisions did not amend section 40200.5 to directly reflect the elimination of the processing agency’s authority to conduct the initial review. Thus it remains that the issuing agency could contract with a processing agency “for the processing of notices of parking violations and notices of delinquent parking violations, prior to filing with the court...." This might be read in isolation, without considering the 1995 changes, as suggesting that the issuing agency may contract with the processing agency to conduct the initial review because that review occurs before the judicial review.

However, given the history of the relevant statutes as we have traced them, it is unreasonable to assume that by failing to amend section 40200.5, the Legislature intended to retain the authority of the processing agency to conduct the initial review and undo the changes it so clearly made in the 1995 amendments.

The 1995 changes deleting any reference to the processing agency’s authority to conduct the initial review, compel the conclusion that the issuing agency (here, the City) must conduct the initial review, and cannot delegate that duty by contract to the processing agency (here, Xerox).

There are, at least, a couple of procurement questions that jumped out at me from the case. First, recall that Since 1985, the City has contracted with Xerox to act as its processing agency, and is paid based on the number of parking citations processed per month, but does not receive additional compensation to conduct initial reviews. I cannot believe that if another contractor held the contract for processing parking citations, that Xerox (or any other contractor) would conduct the initial reviews "for free", recalling again there were 135,291 such initial reviews conducted in 2013. I wonder what the cost of doing that "free" work would be if contracted out to another party, and if that "free" work is actually paid by inflated prices or costs in the "processing" portion of the work.

Second there is an aspect of Guam Procurement Ethics law that stands out. This "free work" is given as part and parcel of getting actual paid work. It is not a gratuity as typically defined because there is nothing paid to a particular person, and no particular person is benefited. But under Guam Procurement Ethics law (5 GCA § 5630(d)):
It shall be a breach of ethical standards for any person who is or may become a contractor ... to offer, give or agree to give any employee or agent of the Territory or for any employee or agent of the Territory to solicit or accept from any such person or entity or agent thereof, a favor or gratuity on behalf of the Territory whether or not such favor or gratuity may be considered a reimbursable expense of the Territory, during the pendency of any matter related to procurement, including contract performance warranty periods.

For purposes of this Section, a favor is anything, including raffle tickets, of more than deminimus value and whether intended for the personal enjoyment of the receiver or for the department or organization in which they are employed or for any person, association, club or organization associated therewith or sponsored thereby.
Guam legislators are (most of the time, on whole) sensitive to "buy in" and bundling and other evils that diminish competition and stain the integrity of the procurement system and undermine the peoples' trust in government.