Civil Beat published an article today, https://www.civilbeat.org/?p=1443162&mc_cid=4772bbfeef&mc_eid=7e39375e0a discussing a piece of legislation that has made its way to the Governor's desk and is awaiting signature. The bill does two things. First, it imposes a 75 day time limit for public agencies to respond to bid protests. Second, it eliminates any cap on the cost of filing for an appeal of a bid protest decision issued by an agency. The first part of the bill went through conference, was subject to numerous hearings and received significant public testimony. The second did not. The first part of the bill will effect an important reform of the procurement code to address the main complaint of participants from bidders to agencies -- delay -- while still affording agencies the ability to seek more time to address protests, if needed.
The second part of the bill effectively eliminates oversight over agency decisions on bid protests on large projects, and will be terrible for procurement.
Why? There are a number of reasons the second part of the bill is bad. First, it is a bad solution in search of a problem. There are probably at least a thousand jobs that are issued through the public procurement process each year. How many of these are subjected to an administrative appeal of a bid protest? Most of the time, a handful. The DCCA keeps an online record of every procurement decision issued as a result of an agency administrative appeal of a bid protest decision, and if you look there, you will see an average of 5-10 appeals in any given year. One year, during the height of recession-driven competition for public works, there were 16. The reason there are so few appeals is because they are already very expensive to do. The cost to file a complaint in the First Circuit Court is $315.00. The cost to file an appeal of an agency's decision on a bid protest is 1% of a bid, up to $10,000.00. $10,000.00 is a lot of money, and most petitioners will pass on an appeal because the cost is so high and it is so difficult to win. It is for this very reason that our office very rarely advises that clients take on appeals -- they are very expensive and hard to win. In other words, the legislature has already put up substantial barriers to appeals, and these barriers have been working -- there are very few appeals. So why is the legislature or the administration seeking to change the law to deal with what is in reality only a handful of appeals? If the answer is "well we need to do something because jobs are being held up by these appeals," the answer is no, that is not true. First, as noted above, there are not that many appeals. Second, that is not true because everything having to do with bid protests is subject to a very strict timeframe for action. Bidders have 5 days to file protests. They have 7 days to file an appeal of an agency decision. The appeal must be decided within 45 days of filing the appeal. In other words, the statutory framework for bid protests is built around the need for speed. Agencies are required to stay awards only during the pendency of the protest and the 45 day appeal period. As noted, the procurement code is designed to streamline the protest process. There is one blatant exception to existing statutory time constraints, however, and that is how long the agency is allowed to review pending protests. By law, agencies are told they must respond to outstanding bid protests "promptly." They have no other time deadline in which to decide a pending protest. As a result, it is very common for public agencies to take months to decide pending bid protests. There are jobs where protests have been outstanding for a year or more before the agency makes a decision. A year. Of course, if a job is going to be held up for a year, it can be understandable that there is a concern about time delays -- but these delays are not being caused by appeals of bid protest decisions. They are happening because that is how long agencies are taking to decide bid protests. The pending legislation addresses this by imposing a 75 day deadline for agency action, subject to extension as needed. In other words, if the concern is delay, the first part of the bill addresses it, and there is no need for the cap removal. And if the agency answer is "there are too many protests," then keep in mind that the removal of the appeal cap does nothing to address the number of bid protests. All it does is remove any hope of oversight over agency decisions. This removal of oversight will be terrible for procurement.
The DOT job discussed in the Civil Beat article involved a client who was found to be the low responsive, responsible bidder and who was awarded a $25 million DOT job, only to have its bid challenged after award by a competitor who claimed a violation of the subcontractor listing statute. At issue was the listing of truckers in the bid. The DOT sided with the protestor and decided that truckers effectively are subcontractors for purposes of being required to be listed in pending construction bids. This decision had incredibly huge implications for public procurement, and needed to be challenged in an appeal to prevent the DOT from altering procurement in a way that would effectively bring it to a halt and render every job subject to protest. Without the ability to appeal the decision, this would have become a declared practice of the agency. Delays would have abounded, costs would have increased, and future and existing jobs would have been thrown into question. Yet, with the removal of the cap, a bidder would have to have put up a $250,000 bond or pay out $250,000 in a cashier's check, to be able to even seek a review of the decision. There is no way any bidder could afford to risk such a sum. The decision would have been left unreviewed, and without the appeals process, the DOT's interpretation of the listing law would have been impervious to review. This is just one job. On projects like the Honolulu Rail project, where projects can be let for as much as $1 billion, that would mean a bidder would have to pay $10 million dollars, cash bond or cashier's check, to be able to seek review of an agency's decision. Is it in the taxpayers' interest to have our largest jobs immune from public scrutiny because appeals have been legislated out of existence by imposition of such hefty barriers to review? The entire point of the procurement code is to provide an open and fair process for procurement that is not only fair in fact, but perceived as fair and open. When agencies are allowed to respond to bid protests without any fear of review, because the cost of such review has been increased so that it is no longer tenable to pursue, contractors and more importantly, the public, lose trust in the process. This brings us to the third and last point regarding this new legislation: a need for open debate of the issue.
Obviously, the imposition of legislation that changes the law so dramatically, in that it imposes a barrier to review that for most large projects will be insurmountable, should be the subject of substantial public debate. That did not happen here. As the Civil Beat article notes, the removal of the cap on the cost of filing for an administrative appeal, was a late appendage added without hearing, without new submission of testimony, and without debate. Why? Why is this dramatic change to the law being pushed through in the last second, rather than being subjected to debate over whether it actually accomplishes what it is supposed to (it does not), or whether it will do more harm than alleged good? (it does). As Tim Lyons notes in the Civil Beat article, bid protests often arise because protestors are doing the job of the agencies -- they are seeking to compel compliance with the procurement code. Removing the realistic capacity for review of agency decisions on bid protests takes away that policing power, and that doesn't help anyone, least of all the taxpaying public.
