Emergency Contracting: Flexibilities in Contracting Procedures during an Emergency (2007)

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6 states bluntly, “Lack of planning does not constitute an emergency purchase.”14 Illinois, on the other hand, which has a very complex and complete list of factors that may constitute an emergency, specifically provides that emergency con- tracting may be done when “immediate action is neces- sary to avoid lapsing or loss of federal or donated funds.”15 As with the federal system, the possibility for misuse does exist, but states have taken steps to avoid that by requiring written justification of actions taken, and by providing detailed and common sense instructions to their procurement officers and other employees in- volved in the contracting process. III. BASIC CONDITIONS FOR WAIVING CONTRACT REQUIREMENTS IN EMERGENCY SITUATIONS A. FAR There are certain basic conditions in the FAR that must be taken into consideration to properly waive FAR-imposed requirements such as competitive bid- ding. The first is that only a person with authority to contract can commit the government to a valid contract. That person is identified, according to the FAR, in two ways. Contracting authority rests first with the head of the agency down to the head of the contracting activity. For the Federal Lands Program in FHWA, this would include the Administrator, the Deputy Administrator, the Executive Director, and the Associate Administra- tor for the Federal Lands Program, as well as each of the Division Engineers for the Federal Lands Highway Divisions. In addition, the head of the agency and by delegation, the head of the contracting activity, have authority to warrant individuals as contracting officers. These indi- viduals are selected based on position and training. Warranted contracting officers have dollar limits as to the amount they can commit the federal government to under contract. They also have strict requirements as to training—both for the initial warrant and for annual or biannual refresher training. The delegation of contract- ing authority is usually by a formal order of some type: agency order, memorandum, accomplished guidance, or procedure. There are circumstances in which a person who does not have the authority to commit to a contract does so and a person with the appropriate authority agrees to bind the government after the initial unauthorized con- tract action has taken place. This is done through a process called ratification. FAR Section 1.602-3 spells out specific guidance as to the application of the ratifi- cation process, stating: 14 New Mexico Internal Procedures, § L, Emergency Pur- chase 124. 15 ILL. ADMIN. CODE, tit. 44, § 1.2030(b)1(F). Agencies should take positive action to preclude, to the maximum extent possible, the need for ratification ac- tions. Although procedures are provided in this section for use in those cases where the ratification of an unauthor- ized commitment is necessary, these procedures may not be used in a manner that encourages such commitments being made by Government personnel. The ratification process also differs from other emer- gency contracting flexibilities in that it can only address the issue of the lack of authority of the person taking the contract action; for example, when a contracting officer exceeds his or her warranted dollar limit. The FAR section cited above also states that a ratification action can only be taken subject to some very severe limitations—for example, the government must have received a benefit from the unauthorized commitment, the contract would have been proper if made by an au- thorized individual, the price was fair and reasonable, and funding was available at the time the commitment was initially entered into. Ratification, therefore, can- not correct a waiver of the contracting process. The second basic condition in the FAR is that re- quirements of the FAR can only be waived at certain levels, depending on the value of the contract affected. Thus, the FAR requirement for competitive bidding may be waived by the contracting officer for a proposed contract that is not anticipated to exceed $500,000, but a waiver for a proposed contract that is not anticipated to exceed $10 million must be approved by the competi- tion advocate, who is a high-level individual in the Agency. Waiver for a proposed contract that is antici- pated to exceed $10 million must be approved by the head of the procuring agency, and waiver for a proposed contract that is anticipated to exceed $50 million must be approved by the senior procurement executive, who is a high-level individual at the departmental Office of Acquisition. Similar stepped authority applies to the waiver of other FAR requirements. The third basic condition is that the contracting offi- cer’s goal should be to obtain as much open competition as the circumstances will allow. This requirement is summarized in the Competition in Contracting Act (CICA). This means that the contracting officer cannot simply adopt a process that involves less than full com- petition without considering both the circumstances and other options available. A good contracting officer exercises discretionary judgment with each contracting action. There are specific exceptions to the requirement for full and open competition detailed in FAR Part 6, including simplified acquisition procedures for contracts below a certain dollar value, task orders placed under Indefinite Delivery-Indefinite Quantity (IDIQ) con- tracts, and architect-engineer contracts,16 which are discussed further in this report. But waiver should never be random or an abuse of that discretion. The fourth basic condition is that open competition requires the contracting officer to publicize proposed actions—including at the presolicitation or planning 16 Brooks Act, 40 U.S.C.§ 541, et seq.

7 stage, at solicitation, and prior to award—, to the extent the circumstances will allow. The purpose of this is to involve the maximum number of potential participants. Again, the problem with emergency contracting is to determine how much publicity the proposed contracting action can allow under the specific circumstances. Pub- licity may have to be limited due to time constraints or due to security constraints. Again, this requires the contracting officer to exercise discretionary judgment. The fifth basic condition is that contracting require- ments should be detailed in writing at the solicitation stage whenever possible and to the extent possible. As noted above, a telephone conversation about general needs may be a valid contract under certain circum- stances. However, the goal of the contracting officer is to do as much as is possible under the specific circum- stances that he or she is dealing with to identify con- tract requirements in writing. This may mean a general written description that is detailed at a later time, re- ferred to as an undefinitized contract, and discussed under FAR Section 16.603. The FAR conditions for waiving contract require- ments in an emergency situation can be summarized as: 1. Only a person with authority to contract can com- mit the government to a valid contract; 2. Requirements of the FAR can only be waived at certain levels, depending on the value of the contract affected; 3. The contracting officer’s goal should be to obtain as much open competition as the circumstances will allow; 4. Open competition requires the contracting officer to publicize proposed actions to the extent the circum- stances will allow; and 5. Contracting requirements should be detailed in writing at the solicitation stage whenever possible and to the extent possible. B. Survey of State Laws and Regulations 1. Who May Issue an Emergency Contract According to responses to the survey questions, a va- riety of state officials have the authority to issue con- tracts in an emergency. In most cases, the authority may be delegated downward from the official desig- nated in state law or regulation; this delegation of au- thority often depends on the amount of money involved in the contract. For example, in Wisconsin, emergency contracts up to the amount of $25,000 may be entered into by the governor’s designee, the Secretary of the Department of Administration.17 17 See WIS. STAT. §§ 16.75(6)(e), 16.75(7), 166.03(1)(b)1,4,5, and the State Procurement Manual, available at http://vendornet.state.wi.us/vendornet/procman/proc3.pdf. There are also Wisconsin Statutes related to emergency high- way work at §§ 84.06 and 84.07, which describe the determina- tion of an emergency for such intergovernmental contracts for highway work and the scope of such work. The most frequently named official in the survey re- sponses was the head of the Department of Transporta- tion, whether called a Secretary, Commissioner, or Di- rector. Twelve of the responding states provided this answer.18 The director of the purchasing or procurement office has the authority in a number of other states, including Illinois, Florida, New Mexico, Pennsylvania, and Utah. In Hawaii, district engineers may issue emergency contracts, and in Iowa contracts engineers have the authority with approval of statewide directors. Alaska’s response states, “Anyone authorized by the Commissioner [of Transportation].” Appendix C com- piles the responses to this question from all of the re- sponding states. 2. When May Emergency Contracting Procedures Be Used The survey of state laws provided by responses re- ceived shows that, generally, government contracting requirements may be waived when there is a threat to the public health, safety, or welfare, or a threat to gov- ernment property or operations, and in addition, that there is no time to follow the usually required proc- esses. Most of the statutory provisions of the responding states include the language of the State Model Pro- curement Code in defining an emergency as a situation in which there “exists a threat to public health, welfare, or safety,” and in requiring that procurements be made “with such competition as is practicable under the cir- cumstances.” For example, the Rhode Island law pro- vides that emergency procurements may be made “when there exists a threat to public health, welfare, or safety under emergency conditions as defined in the regulations; provided, that the emergency procure- ments shall be made with such competition as is practi- cable under the circumstances.”19 For example, in many instances, the statutory or regulatory definition of an emergency has been ex- panded to include a threat to state property unless im- mediate action is taken, or a need to “avoid substantial harm to the functioning of government or the provision of necessary or mandated services.” This last language is from the Massachusetts statute setting out conditions when an emergency contract is appropriate.20 Simi- larly, Iowa law includes language that allows emer- gency contracting processes when there is a “situation in which the [government] must act to preserve critical services and programs.”21 In addition to the above justi- fications, the Illinois Procurement Code provides for 18 Those states were Connecticut, Kansas, Rhode Island, Maine, Mississippi, Montana, Ohio, Oklahoma, North Dakota, Tennessee, Vermont, and Wyoming. 19 R.I. GEN. LAWS § 37-2-21. 20 801 MASS. CODE REGS. 21.05. 21 Iowa Transportation Laws 761, ch. 20, 20.8(7)b(3). Iowa law also provides that an emergency exists when there is a danger to “persons occupying or visiting a public improvement or property located adjacent to the public improvement.” Supra subsec. b(2).