There were a few developments this month in the federal government procurement arena that are likely of interest to our readers:

1. Federal Acquisition Regulatory Council Proposes to Curb Bid Shopping and Protect Subcontractor Payments

The Federal Acquisition Regulatory Council proposed regulatory changes that will curb bid shopping and protect subcontractor payments on federal construction projects.  The proposed amendments to the Federal Acquisition Regulation (FAR), issued on June 10, 2015, would require an offerer (general contractor or bidder) to provide assurances that it will make “the small business concerns that the offerer [bidder] used in preparing its bid or proposal, in the same or greater scope, amount and quality used in preparing and submitting the bid or proposal.”  In other words, if the general contractor relied on the subcontractor’s bid, the general contractor is making a commitment to the government that it will use that subcontractor in performing the construction project.

The bidder will be considered to have used a small business concern in preparing the bid or proposal if:

  • The offer identifies the small business concern as its subcontractor in the bid or proposal or associated small business contracting plan to furnish certain supplies or perform a portion of the contract; or
  • The bidder used the small business concern’s pricing or cost information or technical expertise in preparing the bid or proposal, or there is written evidence of an intent or understanding that the small business concern will be awarded a subcontract for the related work if the bidder is awarded the contract.

This provision is not quite as prescriptive as the Bid Listing Statutes, but this should go a long way to discouraging bid shopping and encouraging bidders to use the firms who have assisted them in obtaining the procurement.

In addition, the proposed rule will require a contractor to provide the contracting officer with a written explanation if the contractor fails to acquire the construction work it indicated would be performed by a small business contractor.  The proposed rule will also require that a prime contractor provide assurances that it will not prohibit a subcontractor from discussing any material matter pertaining to payment or utilization of a subcontractor.  These statutory requirements were incorporated into the Small Business Jobs Act of 2010.

2. VA Reforms its Construction Program

In April 2015, we reported on the case of Kiewit/Turner v. The Department of Veterans’ Affairs (see April 28, 2015 Blog Article).  In that case, it was clear the VA’s administration of the new $600 million Veterans’ Administration Hospital was abnormal—so bad that the contractor was allowed to suspend performance.  That case has prompted the federal government to now remove construction from the VA and place it in the hands of the Corps of Engineers.

On July 22, 2015, the subcommittee on Health of the House Committee of Veterans’ Affairs approved H.R.3106, the “Construction Reform Act of 2015.”  This bill will shift the VA’s major construction program.  If enacted, VA construction projects over $100 million will be managed on a cost-reimbursable basis by the US Army Corps of Engineers or the General Services Administration, depending on the nature of the project.  In addition, the subcommittee’s bill gives the VA and any agency managing its construction program unambiguous statutory standards for the timely processing of change order requests from contractors arising under contracts for construction and alterations of VA facilities.  The dilemma has been that the government contracts (most public works contracts) authorize the contracting officer to unilaterally make changes to its performance under the contract.  The same contract clause imposes upon the contractor specific deadlines during which the contractor must make a request to the contracting officer for its decision.  The contractor’s request must include the contractor’s estimate of the costs to effect the government-directed change, as well as any adjustments to the time of performance.  The contract clause imposes no deadline on the contracting officer to render a decision regarding the contractor’s change order request.

A substantial portion of the cost overrun and schedule slippage on the troubled VA Hospital in Denver (see September 28, 2015 Blog Article) can be attributed to the failure of the VA to take timely action on requests for change orders from the contractor.  The subcommittee’s bill is an essential first step to addressing this fundamental problem in public contracts.  It may encourage similar improvements on a government-wide basis.

The full House Veterans’ Affairs Committee is expected to consider H.R.3106 in September.

Comment:  The VA operates the nation’s largest integrative health care system with 150 medical centers, nearly 14,000 community-based outpatient clinics, community living centers, VA VET Centers, and Domiciliaries.

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