Government Procurement
The American Bar Association’s “Model Procurement Code for State and Local Governments” provides statutory principles and policy guidelines for managing and controlling the procurement of suppliers, services and construction for public purposes. ASA supports the use of the Code as the basis for procurement reform and for the enactment of subcontractor protections, including prompt payment, the elimination of retainage and bid listing.
The Office of Federal Contract Compliance Programs in the U.S. Department of Labor governs the employment practices of federal contractors. It prohibits discrimination and requires government contractors to take affirmative action to hire and promote women and minorities. ASA favors a reexamination of the government’s affirmative action policy and the removal of unnecessary burdens on employment practices.
The U.S. General Accounting Office regularly has ruled in favor of a public policy on federal competitively-bid contracts that allows a low bidder, which can demonstrate an error in its bid, to upwardly adjust its bid price to the extent of the error. ASA believes this practice undermines the competitive bid system and is an open invitation to fraud and deception. ASA believes that when an apparent low bidder discovers an error in its bid which would lead to an increase in the bid price, it should (1) perform under the contract at its original bid price, or (2) withdraw its bid, without penalty or forfeiture of bid security, if it establishes that a valid computational or transcribing error resulted in an unintentional low bid. However, the original low bidder should not be allowed to re-bid the job under any circumstances.
Bidding and Market Development: “White Paper on Subcontractor Bidding and the Law,” “The Prime Contractor Factor”
Contracts and Project Management: “ASA Subcontract Documents Suite”
Construction’s competitive bid system is based on the award of contract to the lowest responsible bidder. Unfortunately, the actual result often is different because of controversial practices known as “bid shopping” and “bid peddling.” ASA supports bid listing as a practical solution to bid shopping and bid peddling. ASA supports bid listing as a practical solution to bid shopping and bid peddling. Listing solicits the actual ultimate price of the subcontractor on the bid date and ensures that this real price will be passed on to the owner at the time of the bid. ASA also supports bid filing and separate contracts as other solutions to bid shopping and bid peddling.
Bidding and Market Development: “White Paper on Subcontractor Bidding and the Law,” “The Prime Contractor Factor”
Contracts and Project Management: “ASA Subcontract Documents Suite”
Court interpretation of the 1978 Contract Disputes Act has precluded the direct access of subcontractors to the government for bringing claims against the government, which may arise from public construction activity. A subcontractor claim under the Act must be certified by the prime contractor who is then responsible for pursuing the claim with the government. ASA supports legislation permitting subcontractors to pursue their own claims or eliminating the certification requirement.
Contracts and Project Management: “ASA Subcontract Documents Suite,” “Subcontractor Negotiating Tips—A Compilation,” “White Paper: Evaluating Dispute Resolution Alternatives”
In view of budget constraints and the need to provide essential government services in a cost-effective and efficient manner, “contracting out” or “privatization” can provide a constructive solution. ASA supports vigorous implementation of Office of Management and Budget Circular A-76, which states the federal government policy of reliance on the private sector. In addition, ASA supports legislation at all levels of government that requires public sector procurement of goods and services from profit-making business concerns.
Many public jurisdictions require a deposit on copies of plans and specifications needed to prepare a bid on public improvement. Such deposits often are “nonreimbursable” or reimbursable in only limited circumstances. ASA supports legislation and regulation that would make such deposits reimbursable in the full amount of the deposit, less the actual cost of reproduction of the plans and specifications as determined by the public agency which prepared them, at the time documents are returned to the public agency.
Some state and local governments have policies that establish a preference for contracting with in-state and local firms for goods and services used by the government. These laws restrain trade and reduce cost-effective competition in the construction industry. ASA opposes local contractor preference laws. In addition, ASA supports reciprocity provisions to discourage the proliferation of such local contractor preferences.
Contractors and subcontractors increasingly are confused by the proliferation of regulations and rules governing federal acquisition. ASA supported the establishment of OFPP and the implementation of the Federal Acquisition Regulation, the single government-wide acquisition code. ASA supports the strengthening of OFPP and strong Congressional oversight of that agency and the acquisition agencies’ continued trend to create a hodgepodge of acquisition rules.
The federal government and some state and local governments give preferential treatment by restricting competition for some publicly-funded construction contracts to firms designated as small and small disadvantaged. ASA believes that publicly-funded construction contracts, except for emergency projects, should be awarded using the competitive bid system. ASA continues to work to build a construction industry in which all qualified contractors can thrive under the open competitive bid system through the development and dissemination of appropriate education and mentor-protégé programs. At the same time, where preference programs exist, ASA will strive to structure them in a manner that encourages business development and competition.
The Davis-Bacon and related acts require private contractors to pay federally-determined wage rates on federal and federally-assisted construction. ASA supports reform legislation or regulations that would allow the use of helpers. ASA also supports amendments to the Copeland Act to eliminate the weekly payroll reporting requirements.
Privatization is the contractual shifting to private entities of functions that traditionally have been undertaken by the government entities. Under this concept, federal, state and local entities contract with private firms to perform all or most of the of the functions required to acquire, finance, design, construct, maintain and operate certain facilities that traditionally have been government-owned and operated. Turning over such functions to the private sector generally necessitates the transfer of some or all of public funds, public property and certain legal preferences and advantages that are inherent in the public sector. When privatization is used, ASA supports requiring the private entity to be substantially guided by the rules governing selection and payment of contractors and subcontractors that would have been applied had the contract been with a public entity.
Slow payment on public construction contributes to cash flow problems of contractors and subcontractors. ASA supports legislation to extend the protections of the federal Prompt Payment Act to federal grant programs. In addition, ASA supports state and local legislation that requires public construction owners to pay their prime contractors with 10 days after receipt of a proper invoice, prime contractors to pay their subcontractors within seven days after receiving payment from the government and subcontractors to pay their sub-subcontractors and suppliers within seven days after receiving payment from the prime contractor. A late payment interest penalty should be paid automatically when payment is late.
Contracts and Project Management: “ASA Subcontract Documents Suite,” “Subcontractor Negotiating Tips—A Compilation,” “ASA Prompt Payment in the 50 States,” “Mastering Final Payment,” “Negotiating the Payment Clause—A Script,” “Strategies for Obtaining Unconditional Payment for Performance,” “ASA Payment Application Reservation of Rights Stickers,” “White Paper: Establishing the Right to Payment Assurances,” “White Paper on Progress Payments”
Payment bonds, under the federal Miller Act and state and local Little Miller Acts, are the primary payment protection for subcontractors and suppliers on public construction. ASA believes these laws should:
- Restrict the use of inappropriate alternatives to surety bonds.
- Regulate the use of individual surety bonds.
- Require that the payment bond be for the total amount of the contract but, in any event, no less than the performance bond.
- Place an affirmative obligation on the government to assure that the prime contractor provides an appropriate bond.
- Require that there are separate performance and payment bonds with stated penal amounts.
- Prohibit the contractual waiver of rights.
- Redefine the notice requirements and filing periods.
- Provide for the payment of reasonable attorney fees and interest.
- Extend the protections to progress payments.
- Extend the protections to all on-site subcontractors.
- Allow notices to be sent by any method that provides sufficient proof of receipt.
- Require a prime contractor to provide a copy of its payment bond to prospective subcontractors and suppliers upon request and to attach a copy of its bond to its subcontracts. Alternatively, make a copy of a prime contractor’s payment bond available on a government-maintained Web site.
- Require the threshold for such bonds to be no higher than $100,000, unless other payment protections are in place.
Contracts and Project Management: “ASA Subcontract Documents Suite,” “Subcontractor Negotiating Tips—A Compilation,” “Strengthening Subcontractor Rights Under Statutory Payment Bonds,” “White Paper: Checking Performance Bond Requirements”
Insurance and Risk Management: “Public-Private Partnership Laws in the States Including Surety Bond Requirements,” “Mastering Negotiations on Surety Bond Requirements”