Just stand still whilst we try to sort this out

On Guam, there are time limits within which an appeal of a protest must be brought, both administratively and for judicial review. Separately, remedies available to a successful protester are significantly different depending on whether the protest is brought before the award or after the award.

This has led to a bit of hard ball, with agencies denying a protest and immediately awarding a contract, notwithstanding that protesters have about two weeks to appeal the award decision from the date of that decision. That nasty business has been held up in recent times as the Public Auditor has ruled on administrative appeal that the award must not be made until a protester's time to appeal has run. There are also moves afoot to try to make that a statutory requirement. (I have alluded to this issue before.)

But, things have already been codified in in the UK and other European jurisdictions which close the door on that treacherous behavior/behaviour, as seen in the following articles. 

The usual caveat here: I cut, rearrange, paraphrase, edit, omit (quite often very important matter), and pretty much often make a mash of articles mentioned, so to be safe and fully informed, read the whole bits at the links.

Procurement Law Jargon Buster - "Standstill Periods" and "Alcatel Letters"

The Public Contracts Regulations 2006 (the ”Regulations”) require public contracting authorities to apply a compulsory waiting period between their decision to award a contract to which the Regulations apply and the date on which the contract is signed. This is commonly called the Standstill Period. The regulations themselves apply to contracts for the supply of goods works and services, where contract values are above specified thresholds.

This requirement follows a judgement of the European Court of Justice in the Alcatel case when the ECJ decided that contracting authorities should allow a period of time to elapse between decision and signing in order to give unsuccessful bidders a chance to seek remedies if they were dissatisfied with the procurement process. To achieve this, a contracting authority must inform bidders of its decision to award the contract, commonly called Alcatel Letters.

The period kicks in from the date the authority decides to award the contract. Usually this will come towards the end of an often lengthy procurement process where bidders will have been shortlisted and finally whittled down to one, for example through a process called “competitive dialogue”. At that point, when the authority makes its selection, the Alcatel Letter is issued and the standstill period should then commence. At the end of that period the contract is signed. This is designed to give unsuccessful bidders an opportunity to challenge the award if they believe there has been a breach of the procurement rules.

The decision notice should include the criteria for the contract award and the reasons for the decision including the characteristics and relative advantages of the winning tender, the scores of the winning bid and of the party receiving the notice. The notice also must name the winning bidder and provide details of the standstill period. On receipt of the notice, unsuccessful bidders may request an “accelerated debrief”.

If the contract is awarded inside the standstill period or an Alcatel letter is not issued, under the new rules, it may be possible to get the contract declared “ineffective” with potentially serious consequences for the procuring authority.

Unsuccessful Tenderers’ Entitlement to Information: Irish Court Clarifies Position

In a significant judgment delivered on 15 February 2016, the High Court has given guidance on the level of detail that must be included in standstill letters to disappointed tenderers in a procurement process. The judgment also provides clarity as to the level of further engagement that is required subsequent to the initial standstill letter, as well as the point at which the challenge period begins to run in circumstances where further reasons are provided.

This case concerned an above-threshold competition run by Kildare County Council (“KCC”) seeking engineering consultancy services in relation to the design and delivery of the new Athy southern distributor road.1 RPS Consulting Engineers Ltd (“RPS”) was unsuccessful, despite having tendered a price that was significantly lower than that of the successful tenderer. RPS engaged in correspondence with KCC in which it alleged that it had not been given sufficient reasons in the standstill letter as to why it had not been selected. KCC responded on two occasions to the effect that it had provided all of the information to which RPS was entitled, at which point RPS instituted proceedings against KCC. The proceedings were commenced after the standstill period and after the contract had already been signed, and the Court was asked only to determine whether sufficient reasons had been given to RPS.

The Court held that KCC had breached its obligation to provide sufficient reasons for its decision, and ordered that KCC provide such reasons within 15 days of the judgment. The Court held that the reasons given by KCC had been inadequate for a number of reasons.

It is not enough to state that the successful tenderer’s response was superior to that of the addressee; rather the letter must contain reference to specific matters, respects, examples or facts which explain why the decision about relative advantage was made (eg matters which the winner’s response included, or the applicant’s response lacked, or vice versa), so that the bidder is aware of the matters of fact and law on the basis of which the decision to reject its tender was reached. In this case, the narrative in the letters to the disappointed bidders consisted only of a repetition of the criteria, a repetition of the score (but phrased in terms of “good”, “very good” etc rather than numerically) and a handful of additional words to indicate comparative quality as between the unsuccessful and successful tenderers. This was held not to be sufficiently precise as to the matters of fact and law that were relied upon by KCC in making its decision. The provision of scores alone will not suffice for qualitatively assessed criteria but may suffice in respect of price.

The reasons provided to a disappointed tenderer must be bespoke to the tenderer in question; it is in breach of the obligation to give reasons to copy and paste generic reasons that could apply to any tenderer. The Court was severely critical of the fact that formulaic reasons were included in all of the letters to unsuccessful tenderers, with the only variations being whether the addressee’s bid was “good”, “very good” etc. Reasons provided must fully explain why the marks in question were awarded; if a person unfamiliar with the process cannot readily understand from the reasons why a particular score was awarded then the reasons will be insufficient.

Contracting authorities must respond positively to requests for further reasons, after the initial standstill letter is sent. A refusal to engage was described as a “fundamental flaw”. The Court concluded that there are two separate elements to the obligation to give reasons under EU law, namely:

• a contracting authority must automatically give a summary of the reasons for its decision with the standstill letter (this is expressly transposed in the Irish Remedies Regulations); and
• the contracting authority must provide further information, within 15 days, upon receipt of a written request (under Article 41 of Directive 2004/18)

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To round out a short overview, also have a look at The five biggest standstill letter mistakes.

Divided we fall -- the Uniformity principle

A core principle, if not a pillar, of an effective procurement system is uniformity.

This principle is illustrated in the American Bar Association's Model Procurement Code, which calls for appointment of a Chief Procurement Officer. (MPC § 2-201.) It is the duty of the CPO to "procure or supervise procurement of all supplies, services, and construction needed by the" jurisdiction, and to "ensure compliance with" the procurement law and regulations of the jurisdiction. (MPC § 2-204(3).)

The MPC Commentary explains its rationale: "State and local public procurement systems are the means through which critical and strategic services, supplies and construction are purchased to support essential public functions. To operate effectively, it is imperative in those systems that there be central leadership to provide direction and cohesion. The Code’s drafters, in creating a central procurement official, do not intend to promote the idea that the day-to-day procurement functions must be performed directly out of the central office. It is expected that the Chief Procurement Officer will freely delegate his or her authority...." (Commentary to MPC § 2-301.)


This centralized authority is expected to make sure there is a common approach, "direction and cohesion", to procurement across all divisions and departments of a jurisdiction. It is an application of the old saying, united we stand, divided we fall, to the integrity of the procurement process.

The U.S. state of Maryland is, as suggested in the following article, having trouble coming to grips with that notion.

Procurement clash may be coming

First, the good news: Gov. Larry Hogan last week created a 19-member commission to come up with ways to fix Maryland’s maddeningly inefficient system for purchasing $7 billion worth of goods and services each year.Here comes the bad news: This group may wind up trying to re-invent the wheel because state legislators appear ready to pass legislation, based on three years of study, that could dramatically change state purchasing practices.

There’s no doubt Maryland’s now-antiquated and creaky procurement system needs an overhaul. What once was a national model in the 1980s for sensible and effective state purchasing practices is now a costly embarrassment.

Comptroller Peter Franchot has been on the warpath for years complaining about this “increasingly unworkable” and “broken” purchasing system “in dire need of reform.”

Lawmakers, especially Del. Dan Morhaim of Baltimore County, have been pushing for procurement reforms, too.

So why are the executive and legislative branches unable to synchronize their reform efforts? Hogan, on his part, appears to want full credit for any changes. He’s hesitant to work with legislators and seems to have ignored the extensive work already completed on procurement reform.

here’s a lingering sense Republican Hogan wants nothing to do with anything initiated by Democratic Gov. Martin O’Malley, whom the current governor has indirectly criticized time and again while announcing his own reforms. Yet it was O’Malley who first took steps to revamp Maryland’s procurement system.

Back in 2012 O’Malley asked the Board of Public Works “to bring someone in to kick the tires” of the purchasing system. “We need to pull this apart and put it back together.” The board contracted with Treya Partners for a thorough study of Maryland’s procurement activities.

The consultant found fragmented oversight of procurement bidding and the ultimate awards, with multiple state agencies setting their own standards and procedures; conflicting and inconsistent interpretations of procurement practice; lax contract management; and poor relationships with state vendors.

Treya made 11 recommendations. After studying these proposals in 2014 and examining procurement laws in other states, the Department of Legislative Services backed many of Treya’s suggestions and added some of its own. Among the main recommendations to lawmakers: Create a Chief Procurement Officer (CPO) under the Board of Public Works and consolidate most procurement officials spread throughout state government under the CPO.

State purchasing would be centralized, uniform processes would be followed consistently and one official would be accountable for ensuring that Maryland gets the best deal and the best quality for dollars spent on services and supplies. It turns out Maryland is one of only a handful of states lacking a Chief Procurement Officer.

None of this is reflected in Hogan’s announcement. Nor is there any recognition that Democratic lawmakers are ready to turn into law many of these procurement recommendations.

Read more at the article link above.

A(nother) contractor gets kicked back

Federal Government Contractor Sentenced To Prison For Accepting Kickbacks And Tax Evasion

An Enterprise, Alabama, resident was sentenced today in the Southern District of Florida to 48 months in prison to be followed by three years of supervised release for accepting unlawful kickbacks and tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to court documents and statements made in open court, Victor Villalobos, 47, worked for a federal prime contractor at Fort Rucker, Alabama. In 2009, Villalobos approached Maxim Silinsky, a Florida-based subcontractor for this company, and solicited illegal kickbacks on the federal subcontracts that Silinsky held in connection with the federal prime contractor. Villalobos agreed that in exchange for kickback payments he would refrain from conduct that would unfavorably affect Silinsky’s business relationship with the federal prime contractor and help ensure that he obtained additional business.

As part of his plea, Villalobos admitted that from June 2009 to December 2014, he received approximately 57 separate wire transfers totaling more than $1.9 million in kickback payments from various foreign and domestic bank accounts controlled by Silinsky. At two separate meetings in 2015, Villalobos accepted envelopes from Silinsky containing cash kickbacks totaling $60,000. Between June 2009 and February 2015, Villalobos attempted to conceal his receipt of the kickbacks by forming nominee entities and opening nominee bank accounts. Villalobos also admitted that he evaded paying income taxes on the kickback payments by causing false federal income tax returns to be filed with the Internal Revenue Service (IRS).

In addition to his prison sentence, U.S. District Judge Daniel T.K. Hurley ordered Villalobos to pay $542,562 in restitution to the IRS. As part of his plea agreement, Villalobos also agreed to be permanently debarred from federal government contracting.

Silinsky pleaded guilty to filing a false tax return in November 2015 and cooperated in the investigation and prosecution of Villalobos. Silinsky was sentenced to one year and one day in prison on Feb. 2. Silinsky also cooperated in the investigation and prosecution of Trevor Smith, a retired U.S. Air Force Master Sergeant who pleaded guilty in October 2015 to unlawfully disclosing confidential procurement information and filing a false tax return. On Jan. 28, Smith was sentenced to 18 months in prison.

California no-bid health contracts not healthy for competition, either

Following on from the same theme in the immediately prior post is this item from California.

California’s health exchange bent own rules in awarding big contracts

A new audit slams Covered California, the agency tasked with enrolling state residents in Obamacare, for not following rules when awarding lucrative contracts without a competitive-bidding process.

Covered California officials did not dispute the audit but said they have adopted new contracting policies and have improved staff training on the subject.

Without competition between prospective firms, the health insurance exchange couldn’t be assured its contractors were the most qualified – or cost-effective – auditors said.

Read more at the link.

The State Auditor's cover letter summarizes:

Covered California’s contracting practices must be improved to ensure the integrity of the process it uses to award sole-source contracts.

We reviewed the justifications for 20 of Covered California’s sole-source contracts and another 20 applicable amendments to those contracts, for a total of 40 justifications. The policy adopted by Covered California’s board of directors (board) and in place during our review stated that sole-source contracts should be justified in writing. In our review, we found that nine of the 40 justifications were insufficient according to Covered California’s board‑adopted policy. For example, Covered California did not sufficiently justify the use of a noncompetitive procurement method to award a contract for marketing and outreach services totaling nearly $134 million.

In addition, we question the validity of an additional three justifications because, even though Covered California asserts either timeliness or unique expertise as a basis for using the noncompetitive procurement process, available documentation indicates that either Covered California had sufficient time to use a competitive procurement process or the vendor was not unique.

Finally, although the California Healthcare Eligibility, Enrollment, and Retention System (CalHEERS) is functional, its rapid design, development, and implementation have resulted in some risks to system maintainability.

Adequate planning and competition are essential principles for an effective procurement system.

Florida no-bid health contract unhealthy for competition

Watchdogs denounce no-bid prison contract

The company hired to provide health care to most of the state’s prison inmates stands to make millions of dollars in administrative fees and profits under a no-bid contract that ultimately could be worth more than a billion dollars.

The Florida Department of Corrections last month contracted with Centurion of Florida to provide prison health care in the north and central regions of the state, following a decision last November by Corizon Healthcare, the previous provider in those areas, to bow out early from its contract. And while the department negotiated with several different vendors to fill the gap left by Corizon’s departure, it did not go through a formal competitive process before contracting with Centurion.

Centurion, though its parent company Centene, has a team of lobbyists that includes former House speakers Dean Cannon and Larry Cretul. Since 2014, Centene has given nearly $315,000 to Florida lawmakers and political committees. “It’s just a concern when you have a contract that big not competitively bid and then you see the amount of campaign contributions that the parent company has been making,” said Ben Wilcox, research director for Integrity Florida. “Did the campaign contributions buy influence? Did the 17 registered lobbyists help them win this contract?”

DOC officials said the agency didn’t have time to go through a competitive process and that it didn’t have to, under a statutory exemption involving the procurement of health care services.

Under its contract with DOC, Centurion will be reimbursed for its actual costs, including salaries and benefits of doctors, nurses and other staff, off-site care and insurance premiums. — to cover human resources, payroll, information technology and, the contract specifically states, profit.

Dominic Calabro, president and CEO of the fiscal watchdog Florida TaxWatch, said the public can’t be assured it got the best deal on prison health care without a competitive process.

“The best way to make sure you get value is through a procurement that is competitive, accountable and transparent,” he said. “And you want to have a system that rewards healthy outcomes and controls costs. The incentive of paying them $268 million (including) 13 percent of their costs encourages them to have higher, not lower, costs.”

There is a great deal more to this, as reported in the story at the link above, which you ought to read in the original at the link above.

Failure to provide effective competition is a glaring hole in the integrity of the procurement process here. But there is another issue mentioned, as quoted above:

"Centurion will be reimbursed for its actual costs.... On top of that, the company will get an additional payment — 13.5 percent of its actual costs...."

Alarm bells would normally ring off the walls with such a deal. Cost plus a percentage of cost contracts are generally considered to be illegal, plain and simple.

The ABA Model Procurement Code § 3-501 says

Subject to the limitations of this Section, any type of contract which will promote the best interests of the [State] may be used; provided that the use of a cost-plus-apercentage-of-cost contract is prohibited.

Guam's procurement law, based on the Model Code, follows suit.

At the national level, the Federal Acquisition Regulations, § 16.102(c), says:

The cost-plus-a-percentage-of-cost system of contracting shall not be used (see 10 U.S.C. 2306(a) and 41 U.S.C. 3905(a)). Prime contracts (including letter contracts) other than firm-fixed-price contracts shall, by an appropriate clause, prohibit cost-plus-a-percentage-of-cost subcontracts (see clauses prescribed in Subpart 44.2 for cost-reimbursement contracts and Subparts 16.2 and 16.4 for fixed-price contracts).