Again, the articles, cases and other materials cited in this blog are usually sliced and diced by me to render a teaching moment, not news. I omit parts, paraphrase and make other distortions and edits to suit the goal of this blog, to provide fact-based lessons concerning government contracting, what those of us in local government operating under the ABA Model Procurement Code call procurement.
Please, click the article's title link and read the original article at the link for clarity and full understanding of the intent of the author of the article cited.
Bid defects pricey for taxpayers
A paperwork error may have cost Augusta taxpayers $1.3 million dollars. At issue before the Augusta Commission for two weeks has been a Butler, Ga., utility construction contractor’s challenge of being disqualified from a job moving massive amounts of earth at the city landfill for a paperwork error.I have to say, this is a rather blinkered way to conduct procurement. You have to stay on track, but you can take off the blinkers and still have a fair race.
Angela Peed Lance told commissioners Tuesday that her father, Peed Bros. Inc. chairman Lester Peed, had signed a return mail receipt on the second addendum to the landfill bid package. The firm incorporated the addendum’s minor changes into its bid total, Lance said. “We did price it correctly; we failed to acknowledge in the bid addendum No. 2,” she said.
Peed’s base bid of $3.8 million was substantially lower than the next lowest, Cooper Barnette and Page, which bid $5.2 million. But Peed did not get the bid, and the City paid the next higher bidder another $1.3 million for the job.
The defects Procurement Director Geri Sams pointed to in disqualifying Peed were two: On a form signed by Lester Peed, a checkbox indicating receipt of each addenda was missing a check mark, and a bid bond form acknowledging receipt of each addenda hadn’t been dated. Sams told commissioners Peed’s lower bid stood apart from the “cluster” of higher bids, making it suspect and susceptible to change orders.
The omissions come despite compliance director Kellie Irving’s assertion that vendors are given detailed information during pre-bid meetings about the requirement, and the office makes itself available to answer any questions.
City officials maintain a decade-old strict “materiality” provision remains the best way for Augusta to avoid liability, whether it saves taxpayers or not. The city procurement department has historically been the target of litigation, including a spate of suits filed after the city made “materiality” a requirement of bids. The requirement means a bid can be disqualified for the slightest technical error, whether in the number of copies provided, a missing seal or blank or a notarization error.
Suits filed in 2008 and 2009 alleged the procurement office wasn’t holding firms to the same standards and some vendors were allowed to correct errors. Augusta lawyer Robert Mullins wrote a 2013 law journal article claiming the provision wasn’t truly objective and could be used to throw any vendor out.
More recently, the commission upheld a protest by a vendor who didn’t certify a good-faith effort to use a local small business to install office furniture. The same omission is costly to taxpayers in a bid award going before a city committee Tuesday.
Augusta procurement has streamlined several processes in recent years to make doing business with the city easier, but protects the city through its strict application of the rules, Environmental Services Director Mark Johnson said. “Procurement is consistent in how they applied the rules,” Johnson said. “That limits our liability and legal exposure.”
Commissioner Marion Williams said vendors should expect to go through multiple hoops to do business with the city, but added loopholes allow some existing contractors to bypass the procurement process altogether. “When you come to the government, you’ve got to go through a process because it’s taxpayers’ money,” Williams said.
The ABA Model Code and its regulations do not penalize every little error. Rather, errors are analyzed in terms of, first, when in the solicitation process did the error occur, second, how "big" they are, and, third, whether the error resulted in prejudice to other bidders. Only "big" errors that cause prejudice to other bidders are material enough to cause a bid to be rejected, on the basis that the bid is nonresponsive to the solicitation.
Guam regulations track the ABA Model Code. It's provision concerning "Mistakes" is found in 2 GAR § 3109(m), with particular reference to this situation in 3109(m)(B)(4). The General Rule for all mistakes is
Correction or withdrawal of a bid because of an inadvertent, nonjudgmental mistakes inThe rule for Mistakes Discovered After Opening but Before Award, which is the situation in this article, is
the bid requires careful consideration to protect the integrity of the competitive bidding system, and to assure fairness. If the mistake is attributable to an error in judgment, the bid may not be corrected. Bid correction or withdrawal by reason of a nonjudgmental mistake is permissible, but only to the extent it is not contrary to the interest of the territory or the fair treatment of other bidders.
Minor informalities are matters of form, rather than substance evident from the bid document, or insignificant mistakes that can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible. The Procurement Officer shall waive such informalities or allow the bidder to correct them depending on which is in the best interest of the territory.Not every little nonconformity is fatal to a bid. Only material nonconformities require a bid to be rejected. The government should not be boxed into paying a higher price to a bidder who was not prejudiced by the negligible error -- which is an error in which the effect on price, quantity, quality, delivery, or contractual conditions is negligible.
Examples include the failure of a bidder to: ... (3) acknowledge receipt of an amendment to the Invitation for Bids; but only if: (i) it is clear from the bid that the bidder received the amendment and intended to be bound by its terms; or (ii) the amendment involved had a negligible effect on price, quantity, quality, or delivery.
In this regard, it is important to distinguish between contractual conditions and solicitation instructions. The requirement to acknowledge amendments is not exactly a contractual condition as an bid instruction.
There are instances in which failure to acknowledge an amendment can result in a bidder's refusal to sign an awarded contract on the basis that the bidder never saw or agreed to the amended provision, to be sure. But not every failure to acknowledge can lead to that result if there are other facts or circumstances which would refute the refusal of a bidder to contract.
For more posts on this topic, click the "materiality" and "mistakes" and "bidder prejudice" label at the end of this post or in the header of the blog.
If you are living in an immaterial world, you don't sweat the small stuff.