Mississippi procurement statutes are clear and unambiguous with regard to the requirement for the listing of a contractor’s certificate of responsibility on the outside of the bid envelope, if the bid is more than $50,000.00. It is also critical to remember the contractor’s name of the bid must be the name recorded as the holder of the Certificate of Responsibility with the Mississippi State Board of Contractors. On a number of occasions, contractors have made the fatal error of submitting their bid using an improper or incomplete corporate name. The result can be the rejection of a contractor’s bid because the entity signing the bid has no Certificate of Responsibility. Paying attention to this one small detail can save your bid from being rejected.

On August 16, 2018, the Mississippi Supreme Court laid to rest any confusion regarding how public authorities are to address the situation where the apparent low bidder’s bid exceeds the “allocated funds” by more than ten percent (10%). [Click here to see Decision]. The procurement in question involved bids for a construction project in the City of Clarksdale (“the City”). The bids received exceeded the “allocated funds” by more than ten percent (10%). Hemphill Construction Company, Inc. was the second low bidder and protested the award to the apparent low bidder and demanded the City reject all bids and re-advertise. Rather than reject the bids, the City increased its budget to provide the necessary funds to award the contract to the apparent low bidder. The Mississippi Supreme Court found that the City’s action to increase the “allocated funds” after bids were opened violated the procurement laws and remanded the case back to the trial court for further proceedings.

This decision makes clear that public authorities cannot change the “allocated funds” for a Project after bids are opened and then discovers the apparent low bidder’s price exceeds the “allocated funds” by more than ten percent (10%). However, if the apparent low bidder’s price is within ten percent (10%) the public authority can utilize Miss. Code Ann. § 31-7-13(d)(iv) to negotiate with the low bidder.

 

The Fifth Circuit’s recent decision in X Technologies, Inc. v. Marvin Test Systems, Inc., 2013 U.S.App. LEXIS 11739 proves the power of a single-letter word. It also proves that even the most reasonable commercial expectations should not color one’s perception of what is actually written in a contract. This focuses on that portion of the X Technologies decision showing that "exclusive teaming" does not mean "mutually exclusive teaming". One partner may have to dance with the one that brung him, but the other partner does not!

The United States Air Force (USAF) sought to purchase a new testing system for its Paveway II Bombs, which are manufactured by Raytheon. The testing system sought by the USAF was the TS-217, which is manufactured by Geotest. However, the hardware and software for the TS-217 are owned by Raytheon. A successful bid for the new TS-217 testing system would require access to the hardware and software (and the right to modify it) for Raytheon’s Paveway II bombs.

The USAF solicitation was initially set-aside for small businesses. X Tech, a small business contractor, decided it would bid on the procurement and reverse-engineer the Raytheon data. X Tech contacted Geotest and negotiated a teaming agreement for the TS-217 hardware, software, and modification rights. X Tech confirmed its oral agreement with Geotest in writing. The portion of that agreement relevant to the litigation stated:

This is an exclusive agreement between X Tech and Geotest.  X Tech will submit Geotest’s workshare as part of X-Tech’s proposal as a response to this RFP. Geotest will not team up with any other company for solicitation FA8224-09-R-0104 except that Geotest may provide prices for the TS-217 only (without any software licenses, support or training) to other potential bidders.

X Tech then submitted 2 bids. One of its bids was on the specified equipment and used Geotest as a critical subcontractor. This "conforming bid" was for $3.2 million. X Tech’s second bid ("non-conforming bid") was based on test equipment other than the TS-217 specified in the Solicitation, and was substantially lower-priced than its confirming bid. X Tech was the only bidder.

The USAF rejected X Tech’s non-conforming bid and its conforming bid because the government cost estimate was substantially lower than $3.2 million. The solicitation was amended to open it up to "full and open" competition. In response to the "full and open" solicitation, X Tech submitted its teamed bid with Geotest. However, Geotest also submitted a bid separately from X Tech for $2.4 million. The USAF awarded to Geotest.

X Tech sued Geotest in Texas state court (it was subsequently removed to federal court on diversity grounds), claiming that Geotest breached the exclusive teaming agreement by teaming with Raytheon in a separate bid. Geotest argued it had not teamed with Raytheon and that it submitted its own, independent bid as merely a licensee of Raytheon data. Geotest also argued that when X Tech submitted its separate, non-conforming bid on the procurement when it was a set-aside for small business, that act constituted a prior material breach of the "exclusive teaming agreement". The jury’s verdict was for X Tech, and the district court entered a final judgment awarding X Tech $336,000 plus attorney’s fees.

One of Geotest’s issues on appeal was the district court’s determination that X Tech did not commit a prior material breach by submitting its separate bid using other than Geotest-manufactured equipment. X Tech argued that the unambiguous language of the teaming agreement only limited Geotest’s ability to team with another contractor and that it did not limit X Tech’s ability to submit a bid that did not include Geotest equipment.

Refusing to imply any mutuality of obligation, the Fifth Circuit sided with X Tech and upheld the verdict against Geotest, in part, on the express terms of the "exclusive teaming agreement", finding that explicitly restricting one party’s ability to team but remaining silent as to the other’s "suggests that the restriction is unilateral". Further, as the teaming agreement required that X Tech submit "a" response including Geotest as its teaming partner, X Tech was not restricted from submitting more than one response to the solicitation. Thus, X Tech’s submission of a competing bid that did not include Geotest did not constitute a "prior material breach" that would have freed Geotest to submit its own bid with Raytheon in response to the amended solicitation.

In a case of first impression, the United States Civilian Board of Contract Appeals upheld a contracting officer’s final decision assessing damages against a prime contractor that failed to comply with the requirement to perform at least 50% of the on-site work. On a contract awarded by the Federal Highway Administration ("FHWA"), prime contractor, Singleton Enterprises ("Singleton") subcontracted the vast majority of its work to Talley Construction ("Talley"). Singleton’s only employees on-site were supervisors, which Singleton apparently borrowed from Talley but paid directly. It was unclear whether Singleton had paid for equipment used on the site, but the CBCA determined that whether or not Singleton had paid for equipment costs, it still performed substantially less than 50% of the value of on-site work.

The FHWA decided that if Singleton did not perform the on-site work, it was not entitled to the benefit of the unit prices it charged for that work. Talley was essentially acting as prime contractor so the FHWA decided it should only pay Singleton what Singleton was paying Talley. To calculate its damages, once the final quantities were determined, the FHWA multiplied Talley’s unit price to Singleton for the work, which was less than Singleton’s unit price to the FHWA for the work. Singleton had already been paid more than the FHWA would have paid based on Talley’s pricing. The appeal upheld not only the FHWA’s decision that it was entitled to recoup its "overpayment" damages from Singleton for not meeting the percentage of work requirement but also the reasonableness of the FHWA’s method of calculating its damages for that breach.

The decision notes that it has no precedential value. However, in similar circumstances, contractors should expect both the Department of Transportation and the Civilian Board of Contract Appeals to act as they did here. See Singleton Enterprises v. Department of Transportation, CBCA No. 2716, June 14, 2012.

On January 3, 2011, the Department of Veterans Affairs announced that any company identifying itself as small or veteran-owned and desiring to do business with the VA must provide documentation to prove its status. For companies that are currently listed on the VA’s Vendor Information Pages but have not previous been verified as small or veteran-owned, the documentation must be provided within 90 days of receiving a request for it from the VA. Companies that desire to be listed on the VA’s Vendor Information Pages must substantiate their status as small or veteran-owned prior to being listed. These expanded verification requirements are part of the Veterans Benefits Act of 2010, which was signed President Obama on October 13, 2010.  Click here for a copy of the announcement.

Where in the Mississippi Procurement Statutes does it require subcontractors to be listed with a bid?  The correct answer is NO WHERE!!  So why use it to decide whether to award the contract to a prime contractor who is the low bidder with a valid certificate of responsibility from the Mississippi State Board of Contractors?

Rule 12 of the Mississippi State Board of Contractor’s Rules and Regulations states:

… the Prime Contractor on or before the date of being awarded the prime Contract, shall submit to the awarding agency a list of all subcontracts, exceeding Fifty Thousand Dollars ($50,000.00) with respect to public projects…

(Emphasis added.)

The Department of Finance and Administration’s Procurement Manual provides as follows concerning the requirement for the listing of subcontractors:

600.55

SUBCONTRACTOR’S LIST

The Contractor will submit to the Bureau a list of all Subcontractors to be used on the Project within seven (7) days after written notice of contract award. Any Subcontractor listed must be acceptable to the Bureau. [Miss Code 1972, Annotated, Sections 31-3-1 through 31-3-23.]

(Emphasis added.)

And, when the City of Vicksburg questioned whether it could award the contract to the apparent low bidder that had not listed its subcontractors as required on the Bid Form, the Attorney General opined as follows:

In response to your first inquiry, previous opinions have stated that a waiver of an irregularity in a bid received would not be improper in cases where (1) the irregularity does not destroy the competitive character of the bid by affecting the amount of the bid thereby giving the bidder an advantage or benefit over other bidders and (2) the irregularity does not involve noncompliance with a statutory or regulatory requirement. See MS AG Op., Dees (June 7, 1995) and MS Ag Op., Kilpatrick, December 19, 1997). See also Parker Construction Company v. Board of Aldermen of the City of Natchez, 721 So.2d 671 (Miss. App. 1998). In your first inquiry, the irregularity was the failure to list the names of subcontractors on the bid form. We have previously opined that there is no statutory or regulatory requirement that a contractor submit a list of subcontractors upon the submission of his or her bid.  MS AG Op., Dees (June 7, 1995).  In fact, as you have stated, the Rules and Regulations of the State Board of Contractors, Rule 12, specifies that "the Prime Contractor, on or before the date of being awarded the prime contract, shall submit to the awarding agency a list of all sub-contracts, exceeding Fifty Thousand Dollars ($50,000.00) with respect to public projects…" It is the responsibility of the awarding authority, however, to make a final determination whether an irregularity in a bid may be waived.

(Emphasis added). Mississippi Attorney General Opinion, dated September 22, 2000, addressed to Nancy D. Thomas. See also, Mississippi Attorney General Opinion, date June 7, 1995, addressed to A.J. "Buddy" Dees, Jr. (public agency permitted to award contract where prime contractor’s bid document listed subcontractor did not have a certificate of responsibility but prime contractor substituted licensed subcontractor prior to award).

Nonetheless, the design professionals for most public projects require the listing of subcontractors. Then, when a prime contractor fails to list its subcontractors or makes an error in listing its subcontractor, the design professional and/or public agency decide whether to reject the bid or waive the "irregularity". What are the criteria for deciding which of the two options will be exercised? You tell me.

If the public agency requires the listing of subcontractors it should state in the Instructions to Bidders that the bid will be rejected if subcontractors are not listed properly. It is just that simple. In addition, public agencies should change their rules and regulations to state listing of subcontractors must be submitted with the bid to be considered for award. This would mean that everyone would know the rules for listing of subcontractors. Will this happen? It is doubtful. It appears design professionals and public agencies prefer the flexibility afforded by such an ambiguity in the bidding process rather than the objectivity associated with clear Instructions to Bidders.

On October 4, 2010, the U.S. Small Business Administration published a final rule in the Federal Register establishing a federal contracting programs for WOSBs.  See Press Release.  In a press release of the same date, the SBA says the new WOSB program will be used to help achieve a statutory goal that 5% of federal contracting dollars go to women-owned small businesses. [insert pdf] Under the program, contracts may be set-aside for competition among WOSBs when the anticipated contract price is not expected to exceed $3 million, except in the case of manufacturing contracts, is not expected to exceed $5 million.

The basic requirements to qualify as a WOSB are that the company be owned and controlled at least 51% by one or more women who are U.S. citizens and "small" according to its primary industry classification. According to the SBA, it will "pursue vigorously punitive action against ineligible firms which seek to take advantage of this program and in so doing deny its benefits to the intended legitimate WOSBs."

The Federal Times.com recently reported on proposed procurement "reforms" that will adversely impact business opportunities for small businesses. The term "procurement reform" suggests changes aimed at increasing contracting opportunities, improving fairness in the procurement system, or lowering the cost of goods and services. The Administration’s proposed changes do not aim to do any of these.

The Obama Administration is considering, among other things, converting services typically performed by small businesses from private performance to government performance. According to Federal Times.com, this change would impact service contractors that provide maintenance services, food services, and information technology services which are typically performed by small businesses. Contacting reforms anger small businesses

The Obama Administration is also looking at other changes that will burden small businesses. It is feared that "strategic sourcing", which combines government needs to achieve economy of scale, will limit those needs for goods or services that small businesses can meet. Stricter environmental requirements are likely to make it difficult for small businesses to compete effectively, too. 

Another change is the Administration’s "High Road" contracting policy which would favor the award of federal contacts to employers who pay higher salaries or provide better benefits. The Service Contract Act and Davis-Bacon Act already require service contractors to pay not less than prevailing, that is, market, wage rates. Why is an initiative that would increase costs to business and the government on the agenda?

Some critics claim the High Road initiative will inject more subjectivity into the procurement process while others say it is meant to reward union support for Obama. AFL-CIO union head opposes ‘High Road’ contracting policy. The FederalTimes.com points out that it is likely to damage small businesses. While small businesses do not have the financial resources to outpace the market for wages or benefits, larger companies aren’t likely to have them, either. Could it be that the High Road policy is not meant as a reform to reduce government contracting costs but meant to re-engineer American enterprise through government purchasing—at any cost?

Service-Disabled Veteran Owned ("SDVO") contracts are one of several types of "set-aside" contracts which permit qualified entities to compete for federal government contracts on other than "full and open" competition terms. SDVO contracts are taking their place among small business set-asides, 8(a) set-asides, and HUBZone set-asides. With submission of its initial offer for a SDVO Small Business Concerns ("SBC") contract set-aside, a concern must certify that:

     

  • it is a SDVO SBC
  •  

  • it is "small" as defined by the NAICS code assigned to the procurement
  •  

  • it will comply with the percentage of work requirements set forth in 13 CFR 125.6
  •  

  • if a joint venture, that both members of the joint venture are small; and
  •  

  • if applicable, it is an eligible nonmanufacturer.

Even if a SDVO meets all of the foregoing on a particular procurement, it must still consider the Small Business Administration’s ("SBA") rules on affiliation, all of which can apply to render a "technically" compliant SDVO as "other than small" and therefore ineligible for the award of SDVO contracts. Whether a SDVO wants to ensure it has not run afoul of the rules prohibiting affiliation between SBCs or a SDVO competitor wants to successfully challenge the SDVO status of a competitor, the SDVO needs to be familiar with the rules by which the SBA determines entities to be affiliated.

For example, a SDVO that is deemed unduly reliant upon a subcontractor for performance of the vital or primary functions of a contract may be deemed to be affiliated with the subcontractor. If the average annual receipts of the SDVO and this "ostensible" subcontractor exceed the applicable size limitation, the SDVO will be deemed ineligible for the SDVO contract. More basic still could be a finding of affiliation based on the "newly organized concern" or shared ownership rules.

Affiliation with a subcontractor may also be found even though a subcontractor is not performing the vital or primary functions of a contract. While bonding assistance alone by a subcontractor generally does not create affiliation between a SBC and a subcontractor, when coupled with other performance assistance, it could result in a finding of affiliation. Other indicia of "assistance" include, but are not limited to, bid preparation by the subcontractor rather than the prime SDVO; the loan of equipment to the SDVO by a subcontractor; office sharing by the SDVO and a subcontractor; and payroll, bookkeeping, and other "back office" assistance by the subcontractor. The proximity of the SDVO’s offices may also come into play when affiliation with a subcontractor is examined. For instance, where a SDVO SBC has been located 1100 miles away from the site of contract performance has been determined by the SBA to render the SDVO unduly reliant upon a subcontractor because the SDVO is too remote to provide meaningful, day-to-day management of the project. However, an SDVO’s location 100 miles away from the site of contract performance has been deemed not too remote.

Whether affiliation exists to render your SDVO or a competitor’s SDVO ineligible for a particular procurement or ineligible generally for the SDVO program is very fact-specific. To minimize the risk of being declared "other than small" SDVOs should carefully review all rules by which the SBA examines allegations of affiliation.

If you are bidding on projects awarded through the Mississippi Department of Finance and Administration, Bureau of Building, Grounds and Real Property Management ("the Bureau"), you might not be awarded the contract, even if you are the apparent low bidder.

The Bureau is very particular about with whom it does business. Effective May 18, 2009, the Bureau has expanded the grounds for disqualifying a bidder from competition. (Link to rules.) These recent changes are highlighted below.

1.04 DISQUALIFICATION OF BIDDER: A Bidder may be disqualified for any of the following reasons:

A.  Failure to comply with the bid requirements.  (This provision was in 600.53 but missing in 1.04 of the Instructions to Bidders.

B.  Bidder is in arrears on existing Contract with the Bureau or another state agency.

C.  Bidder is, or anticipates being, in litigation or arbitration with the Bureau or another state agency.

D.  Bidder has defaulted on a previous Contract.

     

    BOB Manual, Instructions to Bidders, Section 00100, Part 1, General, Paragraph 1.04.

Mississippi’s Public Procurement Statute requires award to the "lowest and best bidder". However, the Mississippi Courts have recognized that the lowest bid may not necessarily be the best bid. Thus, state agencies have been afforded considerable deference when deciding which contractor has submitted the "lowest and best bid". One of the areas the Mississippi Supreme Court has recognized may be considered in the evaluation of bids is a contractor’s past performance record. However, in my opinion, the Bureau’s grounds for disqualification impermissibly expand the area of inquiry by seeking to penalize a contractor for exercising its contractual right to pursue a claim against the Bureau or another state agency with which the contractor has a contract.

The Bureau’s new grounds for disqualification gives it the authority to now reject a bid if the contractor "anticipates" being in litigation or arbitration. Hypothetically, this means that if a contractor has a contract with the Bureau or another state agency, writes a "claim" letter stating the contractor believes it has a right to an equitable adjustment in the contract price and/or time and subsequently submits a bid on another Bureau project, the contractor’s bid may be rejected because the letter could be construed as a sign the contractor "anticipates" being in litigation or arbitration with the Bureau. The Bureau may even require a certification as part of its bid requirements wherein the contractor must represent it does not anticipate being in litigation or arbitration with the Bureau or another state agency. The obvious intent of this provision is to discourage contractors from asserting claims against the Bureau or another state agency on construction projects. It appears the Bureau has made the decision that such draconian tactics are more effective then dealing with legitimate claims which the contractor has a right to assert under the Bureau’s contract documents.