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Volume 8 - Number 6 | February 8, 2010

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Recent Issues

  EDITOR'S NOTES | Issue 8-6
The mandatory bid listing of intended subcontractors has become common in public contracting. Imposed by statute, regulation or simply administrative policy, bid listing prohibits the successful contract awardee from substituting listed subcontractors without the authorization of the public project owner. The purpose is to protect the interests of trade contractors by preventing the practice of "bid shopping" after contract award. Bid listing is also used to mandate participation by minority and women-owned business enterprises (MBEs/WBEs).

A recent California case illustrates the pitfalls of unauthorized substitution or under-utilization of listed subcontractors. A prime contractor completed a complex public works project for the City of Los Angeles. Everyone involved agreed the project was a tremendous success. Yet, the contractor was assessed a $200,000 penalty for allowing a reduced scope of work for two listed MBE lower-tier subcontractors. The listing of lower-tier subs and the penalty itself were called for not under the state bid listing statute, but under the terms of the city's contract, which the court found to be enforceable.

Other cases this week involved progress payments and a technical/price tradeoff in a "best value" evaluation. A project owner's failure to make a progress payment was justified by the contractor's prior deviation from the specifications. And, award of a contract to a higher price offeror was not justified by an adequately documented comparison of technical proposals.
  CONTRACTOR PENALIZED FOR UNDER-UTILIZATION OF LISTED LOWER-TIER SUBS
Under the terms of a public works contract, the municipal project owner could assess a penalty against the prime contractor for the under-utilization of bid-listed MBE and WBE suppliers and lower-tier subcontractors.
  CONTRACTOR DEVIATION JUSTIFIED LACK OF PROGRESS PAYMENT
Regardless of when a progress payment was due, the contractor’s deviation from the specifications justified the project owner’s nonpayment.
  TECHNICAL/PRICE TRADEOFF NOT JUSTIFIED
A procuring agency failed to document numerical scores assigned to technical proposals and failed to make direct comparisons between the proposals. A technical/price tradeoff, awarding the contract to a higher price offeror, was unjustified.