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

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10 V. SPECIFIC AUTHORITY TO WAIVE CERTAIN CONTRACTING REQUIREMENTS A. Waiver of Specific FAR Requirements The FAR requirements that can be waived go beyond the level of competition, the amount of publicity, and the level of written detail in the specification. A more detailed listing is included in Appendix B. B. State Statutes from Survey To determine the extent to which normal contracting requirements can be waived in an emergency, state agencies were asked to indicate in the survey question- naire whether their laws and procurement regulations allowed for waiver of certain contracting procedures in the case of emergency contracts. The questions were directed toward both solicitation and award of con- tracts, and the administration of contracts. The five questions were: 1. Does state law or regulations set conditions for waiving contract requirements in emergency situations? 2. Does state law or regulations authorize award be- fore the contract requirements can be fully defined? 3. Do laws and regulations allow for limited competi- tion or sole source award of a contract in an emergency? 4. Do laws and regulations allow for waiver of specific contracting requirements related to the solicitation and award? 5. Do laws and regulations allow for waiver of specific contracting requirements related to the administration of contracts? In answer to the first question, all responding states answered with some form of affirmative answer, as dis- cussed in Section 3.C above. That discussion will not be repeated here. Iowa’s response pointed out that under its laws and regulations, contract requirements may only be waived for nonconstruction contracts; for con- struction contracts, the answer is “no.” In answer to the question of whether state law or regulations authorize award before the contract re- quirements can be fully defined, 18 of the states said “yes” and 10 said “no”. Oklahoma responded that its law and regulations do not address that issue; Montana responded that the Transportation Commission sets the terms of any contract awarded under “special circum- stances”; and Iowa law provides for such an award in the case of nonconstruction contracts, but not for con- struction contracts. The third question, “do laws and regulations allow for limited competition or sole source award of a contract in an emergency?,” was answered with some form of “yes” by all respondents. Since almost all the states require that emergency contracts be made with “such competi- tion as is practicable under the circumstances,”31 the 31 Rhode Island statute quoted here, R.I. GEN. LAWS § 37-2- 21(b). answers, in many cases, were qualified by the require- ment that multiple bids be obtained. Pennsylvania law, for example, provides that “when practical, two bids shall be obtained” in contracting for supplies, and in construction contracts, telephone bids “from at least two responsible contractors, if practical” are to be solicited.32 Massachusetts law is similar. The response made to this question by Florida is a good summary of the re- plies of many of the states: The agency may proceed with the procurement of com- modities or contractual services without receiving com- petitive sealed bids, proposals or replies, however, such emergency procurement shall be made by obtaining pric- ing information from at least two vendors, unless the agency determines in writing that the time required to obtain pricing information will increase the immediate danger to the public health, safety or welfare or other substantial loss to the state. In response to the question regarding waivers for so- licitation and award (Question 4 above (No. 6 in the survey form)), all states answered in the affirmative except Florida and Michigan. Florida’s response stated, “No. Must have minimum terms and conditions re- quired by law.” Michigan’s response stated, “Yes, lim- ited competition to prequalified construction contracts. No, [as to] sole source. Proprietary process, yes.” In response to the last question pertaining to contract administration (No. 7 on the survey form), the answers were almost equally divided, with 17 states checking the “Yes Box” and 14 answering in the negative. Some states’ answers were modified by comments. For exam- ple, Michigan’s answer stated, “No process payments are allowed. Lump sum [payments are made] after in- spect and acceptance instead.” Connecticut’s response states that for Case I emergencies, the contractor must agree to be paid on a cost-plus basis. The responses are summarized in Appendix D. Follow-up telephone calls were made to 11 of the re- sponding states to determine what their experience had been insofar as challenges to emergency contracts by vendors who were not awarded contracts, or by unsuc- cessful bidders. As discussed previously, most of those state DOTs who responded to these telephone or email inquiries indicated that they have not experienced for- mal complaints or protests. VI. FEDERAL STATUTES APPLICABLE TO STATE EMERGENCY PROCUREMENTS (TITLE 23) A. Federal Statutes Applicable to State Emergency Procurements (Title 23) FHWA addresses the impact of emergencies on state procurement in three distinct ways. The first is the re- quirement in Title 23, U.S. Code, § 302, that any state desiring to receive federal funding must have estab- lished a state transportation department that has ade- quate powers and is suitably equipped and organized to 32 Procurement Handbook, pt. II, ch. 6.

11 discharge to the satisfaction of the U.S. Secretary of Transportation the duties required by Title 23. This means that every state has a preexisting organization to address the need for a highway-related procurement, including financial accountability and staffing exper- tise. Title 23, Code of Federal Regulations, Part 1, § 1.3, requires that each state highway department must be authorized by the laws of the state to make final deci- sions for the state in all matters relating to, and to en- ter into, on behalf of the state, all contracts and agree- ments for projects and to take such other actions on behalf of the state as may be necessary to comply with federal laws and regulations under Title 23. This means that the state DOT has authority to take immediate action in an emergency without having to get authority from the governor or the state legislature. The second is that Title 23, U.S. Code, § 125, estab- lishes a fund to repay the states for emergency repairs. The states still need to take action to make the repairs, but they know there is a potential funding source for such work. Sec. 125. Emergency relief (a) General Eligibility—Subject to this section and section 120, an emergency fund is authorized for expenditure by the Secretary for the repair or reconstruction of high- ways, roads, and trails, in any part of the United States, including Indian reservations, that the Secretary finds have suffered serious damage as a result of—- (1) natural disaster over a wide area, such as by a flood, hurricane, tidal wave, earthquake, severe storm, or land- slide; or (2) catastrophic failure from any external cause. This fund only reimburses the state for repair and re- construction of highways, not construction of a new or improved facility. Third, while Title 23, U.S. Code and Title 23, Code of Federal Regulations, set forth required contracting pro- cedures, those procedures contain flexibilities in times of emergency. The most basic of these is the exception to the requirement for competitive bidding: Title 23, U.S. Code Sec. 112. Letting of contracts (a) In all cases where the construction is to be performed by the State transportation department or under its su- pervision, a request for submission of bids shall be made by advertisement unless some other method is approved by the Secretary. The Secretary shall require such plans and specifications and such methods of bidding as shall be effective in securing competition. (b) Bidding Requirements.— (1) In general.—Subject to paragraphs (2) and (3), construction of each project, subject to the provisions of subsection (a) of this section, shall be performed by con- tract awarded by competitive bidding, unless the State transportation department demonstrates, to the satisfac- tion of the Secretary, that some other method is more cost effective or that an emergency exists. Title 23, Code of Federal Regulations, Part 635 Subpart A—Contract Procedures Section 635.104 Method of Construction (a) Actual construction work shall be performed by con- tract awarded by competitive bidding; unless, as provided in Sec. 635.104(b), the STD demonstrates to the satisfac- tion of the Division Administrator that some other method is more cost effective or that an emergency exists. Sec. 635.120 Changes and extra work (a) Following authorization to proceed with a project, all major changes in the plans and contract provisions and all major extra work shall have formal approval by the Division Administrator in advance of their effective dates. However, when emergency or unusual conditions justify, the Division Administrator may give tentative advance approval orally to such changes or extra work and ratify such approval with formal approval as soon thereafter as practicable. Subpart B—Force Account Construction Sec. 635.204 Determination of more cost effective method or an emergency (a) Congress has expressly provided that the contract method based on competitive bidding shall be used by a State transportation department or county for perform- ance of highway work financed with the aid of Federal funds unless the State transportation department dem- onstrates, to the satisfaction of the Secretary, that some other method is more cost effective or that an emergency exists. (b) When a State transportation department determines it necessary due to an emergency to undertake a federally financed highway construction project by force account or negotiated contract method, it shall submit a request to the Division Administrator identifying and describing the project, the kinds of work to be performed, the method to be used, the estimated costs, the estimated Federal Funds to be provided, and the reason or reasons that an emergency exists. Subpart C—Physical Construction Authorization Sec. 635.309 Authorization Authorization to advertise the physical construction for bids or to proceed with force account construction thereof shall normally be issued as soon as, but not until, all of the following conditions have been met: ...(e) An affirmative finding of cost effectiveness or that an emergency exists has been made as required by 23 U.S.C. 112, when construction by some method other than contract based on competitive bidding is contem- plated. In addition, the fact that the FHWA Division Offices are located in each State Capital, available to confer immediately with the states on whether their proposed procurements will support the contribution of federal funding, enhances immediate action.