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

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8 emergency purchases “when immediate expenditure is necessary for repairs to State property in order to pro- tect against further loss of or damage to State property, to prevent or minimize serious disruption to State ser- vices, or to ensure the integrity of State records.”22 Ha- waii’s statutory scheme provides for emergency con- tracting procedures when there is a “threat to life, public health, welfare, or safety by reason of major natural disaster, epidemic, riot, fire, or such other rea- son” as the head of a purchasing agency determines; when normal contracting procedures will not meet the need; and without the needed goods, services, or con- struction, “the continued functioning of government, the preservation of irreplaceable property, or the health and safety of any person will be seriously threatened.”23 Several of the states provided copies of portions of their procurement manuals that relate to contracting in an emergency situation. The guidance set forth in these manuals makes clear that contracting with limited competition is reserved for those situations where fol- lowing the usually required procedures will not answer the need. For example, the Wisconsin Procurement Manual defines an “emergency situation” as when there is not only a threat to public health, safety, and welfare, but also the event was “unforeseen; calls for immediate action; and cannot be responded to using established procurement methods.”24 Likewise, the Arizona Pro- curement Code provides that emergency procurements will only be used when the situation exists that is not only a threat, but “which makes compliance with [usual contracting requirements] impracticable, unnecessary, or contrary to the public interest.”25 Alaska’s Field Operations Guide states that emer- gency procedures “may be used to purchase only those supplies or services required to relieve the emergency situation. Subsequent needs shall be obtained using normal purchasing procedures.”26 The Kansas DOT Standard Operating Manual contains this policy state- ment as guidance for its procurement officers: “When an emergency condition exists that jeopardizes the function of state government, the protection of property, or the health and safety of individuals, immediate cor- rective actions including steps for necessary emergency procurements shall be taken to stabilize the situation until a permanent solution can be obtained through conventional channels.” This sums up the position of most of the states, as set forth in their laws, regulations, and other guidance for contracting officers, that specific conditions must exist to justify emergency contracting, and that once the emergency need is met, regular and ordinary competi- 22 ILL. COMP. STAT. 500/20-30. 23 HAW. REV. STAT. § 103D-307. 24 Emergency Procurement in State Procurement Manual, No. PRO-C-3, effective June 19, 2003. 25 Arizona Procurement Code, ch. 23, art. 3. 26 Introduction in Alaska Field Operations Guide 132 (Jan. 2005). tive contracting procedures will be used for a “perma- nent solution.” An especially interesting response to the question- naire was made by the New Jersey Department of Transportation (NJDOT). The New Jersey laws allow for contracting without advertising and the competitive bidding process, but with whatever “competition is practicable,” when “the public exigency requires the immediate delivery of the articles or performance of the service.”27 For this method of contracting, the response points out, “the oversight lies within the New Jersey Department of Treasury.” Rather than use this con- tracting process, the NJDOT prepares for emergencies by maintaining contracts known as “if and where di- rected” or “time and materials” contracts that allow NJDOT to “pay a contractor for labor by the hour, per category, and to pay for materials by reimbursing the contractor for costs plus a percentage above those costs for each item purchased.” NJDOT also maintains an emergency fuel contract, which was utilized (and de- scribed as “invaluable”) during the September 11, 2001, emergency, when the Holland Tunnel was closed, ne- cessitating the construction of a temporary bus depot in a state park. The emergency fuel supply was used for construction equipment, as well as for police and other state government vehicles. The response points out that “while this method of conducting business in an emer- gency is not prohibited by the FHWA, it is not the pre- ferred way of doing business,” since FHWA is of the opinion that it does not insure the state the best price.28 This method of contracting, however, has proven to be the most useful to NJDOT. It is not known if other states use “if and where directed” or “time and materi- als” contracts in emergency situations, since that ques- tion was not part of the survey. However, information has been provided from Florida that a similar arrange- ment is used there. These contracts, called “push but- ton” contracts, are awarded competitively before an emergency exists, but in a geographical area where emergency needs can be anticipated. More than one contractor may be “on call” in a particular geographical area for specific emergency services such as ice or fuel supply or debris removal. IV. RANGE OF CONTRACTING OPTIONS It should now be clear that the options available un- der the FAR to a contracting officer in emergency situa- tions include the following: 1. A full open and competitive contract following all appropriate FAR procedures. 2. A limited competition contract otherwise following all appropriate FAR procedures. 3. A sole source contract otherwise following all ap- propriate FAR procedures. 27 N.J. STAT. ANN. §§ 52:32-7, 52:34-10. 28 Letter from Jeffrey J. Callahan, NJDOT (May 5, 2006).

9 4. A limited competition or sole source contract that involves limitations on publicity but otherwise follows all appropriate FAR procedures. 5. A limited competition or sole source contract that does not fully detail the work to be performed, but in- volves some level of written contract requirements. 6. A limited competition or sole source contract that is created by an oral commitment. The level of competition may range from: • A single phone call • Several phone calls • Faxed requests for proposals (RFPs) to multiple contractors • Reduced notice • Reduced time to respond • Standard procedure. The detail in the scope of work may be a single phone call discussing the work needed or full plans and specs. Compensation protocols may vary among: • Requiring contractor to document actual costs • Using the same rates as a current contract • Standard pricing in the industry • Faxed proposals • Full bid. Environmental Concerns What level of environmental review is required under the National Environmental Protection Act (NEPA)? The Council on Environmental Quality (CEQ), which issues the implementation guidance for Federal NEPA actions, states: 1506.11 Where emergency circumstances make it neces- sary to take an action with significant environmental im- pact without observing the provisions of these regula- tions, the Federal agency taking the action should consult with the Council [on Environmental Quality] about alter- native arrangements. Agencies and the Council will limit such arrangements to actions necessary to control the immediate impacts of the emergency. Other actions re- main subject to NEPA review.29 The short answer to all of the above is that it depends on the immediacy of the threat caused by the emer- gency. To save lives, immediate action is justified. To protect health, some consideration is required as to what is the best way to do so. For example, does a build- ing with mold need to be cleaned or destroyed? That consideration will help the contracting officer balance the immediacy of the threat against the need for stan- dard procurement procedures. The authority to take expedited action to reopen a road depends on the need for the road. The sole road available to evacuate an area, or to reach a hospital, justifies the least process. A road to a tourist destination without residences can generally be repaired using standard procedures. 29 40 C.F.R. § 1506.11. A. Record-Keeping Requirements The greater the scope of the waiver of standard proc- esses, the greater the need for documentation to justify the waiver. The contracting officer should be making notes on whom he or she is speaking to and when; what price, if any, was agreed on; and, most importantly, specifically what work was authorized. These notes are essential in order to be able to reconstruct afterward what happened. These issues were made evident in the awarding of contracts for cleanup work after Hurricane Katrina. Because there was inadequate documentation of the justification for limiting competition and of the deter- mination of available competition, many of those con- tracts had to be terminated and the process restarted. However, several unwritten contracts to strengthen or repair the levees immediately at the time of the flooding were valid. The difference between the two types of con- tracts is that there was inadequate time to obtain any level of competition during the flooding, but there was adequate time to obtain some level of competition to do cleanup work after the hurricane. Under the require- ments of the FAR, which is applied to state procure- ment if FEMA funding is sought, the contracting officer is required to obtain whatever competition it can under the circumstances, and, most importantly, to document what the circumstances were that drove that decision. According to a new report, an official with the U.S. Army Corps of Engineers, which handles contracting for FEMA, admitted 2 weeks after the hurricane that they had no records of what contracts had been awarded. "We haven't felt a need to keep a list of contracts awarded to date."30 This meant that oversight of the contracts awarded was nearly impossible, which proba- bly was a factor in the decision to cancel and rebid. B. What Can Go Wrong? Since the contracting officer has discretion to the lim- its of his or her authority, and senior Agency officials have unlimited authority, what can go wrong? Some common issues include: 1. No record or recollection of what work was ordered or from whom; 2. The same work awarded to multiple contractors; 3. No requirement that the contractor be able to re- construct his or her actual costs; 4. Unclear work orders—wrong work, wrong place, etc.; 5. Order without authority—may be able to address through ratification; 6. Sole source when limited/open competition was possible; and 7. Inflated cost charges—may come from suppli- ers/subcontractors. 30 G. Witte & R. Merle, Government Tries to Balance Scru- tiny, Speed, WASHINGTON POST, Sept. 15, 2005, at D1, avail- able at http://www.washingtonpost.com/wp- dyn/content/article/2005/09/14/AR2005091402558.html.