Several Virginia statutes and regulations apply to procurements made by the Virginia state government and local Virginia governments and quasi-governmental agencies (such as city-owned utilities).
The vast majority of procurement by Virginia’s state and local governments occurs under the auspices of the Virginia Public Procurement Act (the “VPPA”). For local governments, the VPPA requires that each locality adopt a Purchasing Resolution that gives the specific rules for that particular jurisdiction.
The VPPA applies to the acquisition of goods, services, construction and insurance. Thus, small and medium-sized businesses that want to sell goods, services or insurance or perform construction for state and/or local government should develop an understanding of the VPPA and the Purchasing Resolutions for the localities in which they will bid for work.
For the procurement of services, VPPA makes important distinctions between professional services—such as a doctor, architect, engineer or other licensed professional—and non-professional services.
The VPPA does not apply to the purchase of real estate. It also does not apply to infrastructure projects in which a private company will have an ownership interest; those are covered by separate rules set out in the Public-Private Education Facilities and Infrastructure Act of 2002 (the “PPEA”).
Methods of Procurement
Methods of Procurement Generally
The VPPA states a preference for competitive procurement methods. Presumably, competition ensures that the government does not overpay for goods and services. Under the VPPA, non-competitive procurement is permitted only under specifically-defined exceptions. The most notable of these exceptions are purchases under $100,000, emergency purchases and sole-source purchases.
The government purchasing agents use one of two competitive procurement methods: competitive sealed bidding or competitive negotiation. The essential difference between the two is that the purchasing agency uses sealed bidding if it knows exactly what it wants, and uses competitive negotiation if it only generally knows what it wants. This is where the procurement categories have their significance—the VPPA assigns different default and permitted procurement methods depending on what is being purchased.
The VPPA assumes that the government should know exactly what it wants when it purchases goods or non-professional services, and requires the agency to justify using negotiation for those purchases. The VPPA assumes that government agencies can never know exactly what they want from professional services providers, and requires that negotiation be used for those purchases. Construction has its own niche. If the construction services are paired with architectural and engineering services in a design-build contract, then the VPPA requires negotiation be used. In traditional construction contract situations where the construction services are contracted for separate from the design services, the construction aspect must be procured through sealed bids.
Regardless of which competitive procurement method is used, the purchasing agency must publicize its procurement activity. Most agencies, including local governments, use the eVA system provided by the state government to automate the procurement notice process. Businesses interested in selling to state and local government in Virginia should register on eVA to receive relevant notices. The web address for the eVA system is http://www.eva.state.va.us/.
Competitive Sealed Bidding
When using the sealed bidding process, the purchasing agency initiates the procurement process with an “Invitation to Bid.” The Invitation to Bid includes a specific description of what the agency wants to procure. It must be posted for at least 10 days, though as a practical matter most purchasing agencies post it for a longer period. Bidders must get their bids in by the deadline laid out in the Invitation to Bid.
The VPPA requires the purchasing agency to award the contract to the “responsive and responsible” bidder with the lowest price. The law is fairly rigorous on this point. The agency cannot reject all of the bids simply to avoid awarding the contract to a particular bidder. (It can, however, reject all of the bids if it believes that a rebid will increase competition.) The agency cannot use a determination of irresponsibility as an easy way out; the agency must justify any determination that a low bidder was not responsible.
When using the competitive negotiation process, the purchasing agency initiates the procurement process with a “Request for Proposals.” The Request for Proposals includes a general description of what the agency wants to procure and a list of the specific factors that the purchaser will use to evaluate the proposals. It must be posted for at least 10 days, though as a practical matter most purchasing agencies post it for a longer period. Offerors must get their proposals in by the deadline set forth in the Request for Proposals.
The VPPA requires the purchasing agency to award the contract to the “best” offeror with whom the agency can negotiate a contract. The purchaser identifies the “best” offeror by having a committee review all of the proposals that come in and interviewing at least two of the offerors. (The process of selecting the offerors to interview is known as “short-listing.”) The agency then negotiates with its highest-ranked offeror. The agency can move down the list of offerors if it does not reach an agreement with its first choice.
As with sealed bidding, the VPPA includes provisions that resist having contracts driven to pre-determined vendors. The agency cannot reject all of the proposals simply to avoid awarding the contract to a particular offeror, though it may reject all of the offers if it believes that a new round of proposals will produce stronger proposals
An important distinction from sealed bidding is that the offeror with the lowest price will not necessarily be the one with the “best” proposal. The committee evaluates all aspects of the proposal for what will best achieve the purchaser’s goals; price is not the only factor.
Exception #1: Small Purchase
The first exception to the competitive procurement requirements is one that most benefits small businesses—small purchases. As noted above, the VPPA broadly exempts purchases under $100,000 from competitive procurement requirements. As a practical matter, the smallest purchases have the fewest procedural requirements. Each county or other purchasing agency may define its own small purchase threshold. For example, Fairfax County defines small purchases as any under $5,000.
For small purchases, vendor contact with the purchasing agency is key since there will not be a formal bid or proposal. These contracts go to the vendors that the agencies know to call. Indeed, Fairfax County expresses a preference for companies already registered on eVA or with which it has already contracted.
Exception #2: Open Market
The second exception to the competitive procurement requirements, open market purchases, is basically a big brother to the small purchase exception. The open market exception also falls under the VPPA’s broad exemption of purchases under $100,000; the primary distinction from small purchases is that open market purchases generally require an informal bidding procedure. Again, each county or other purchasing agency may define its own threshold; the only absolute is that the purchases must be under $100,000.
For example, Fairfax County’s Purchasing Resolution prescribes use of the open market method for purchases between $5,000 and $50,000. The County requires three oral or written quotes for purchases below $10,000 and four written unsealed bids for purchases between $10,000 and $50,000.
As with small purchases, potential vendors must put themselves in position to be asked for a quote by the purchasing agency.
Exception #3: Sole Source
The third exception to the competitive procurement requirements is often a bane of small businesses. If the purchasing agency determines that “there is only one source practicably available” for the purchase, then it may make the purchase directly from that source. The VPPA employs public scrutiny to check abuse of this determination, by requiring that the agency post notice that it awarded a sole source contract.
Exception #4: Emergency
The fourth exception to the competitive procurement requirements is when a government agency must make an immediate purchase to avoid “dimunition of essential service,” such as a purchase of extra salt and sand in the midst of snowstorms. As with sole source contracts, public scrutiny is the check on agency use of this exception; agencies must post notice of any emergency procurement they make.
Exception #5: Insurance
The fifth exception comes from a bit of flexibility built into the VPPA. If a local government makes a determination that purchasing insurance will be best facilitated by non-competitive methods, such as purchasing through a broker, then the government may avoid competitive procurement methods in purchasing insurance. For example, Fairfax County, in its Purchasing Resolution, has determined that it is best served by purchasing insurance through its broker.
Avoiding Procurement Method Choice Altogether: Piggybacking on Another Agency’s Contract
The VPPA and the county Purchasing Resolutions do allow an end-run around all of these procurement methods—purchasing off of a contract already signed by another government agency. The contracts typically used for this purchase include state-wide contracts and cooperative purchasing arrangements such as the Washington Metropolitan Council of Governments.
Invitations to Bid will often include an option to allow a particular bid to apply to other agencies. Checking the appropriate boxes is an easy way for small businesses to magnify the power of their efforts to reach out to potential government purchasers.
Preparing to Respond to an Opportunity
Vendors may obtain registrations that give them a leg up in the procurement process. Every potential vendor should register on Virginia’s eVA system; that registration will put the business in a position to take advantage of all of the procurement opportunities that come across that system. eVA-registered vendors may also sign up to receive emails whenever procurement opportunities arise for particular categories of goods or services.
If a business is small (250 or fewer employees and $10 million or less in annual gross receipts) then the business may also register to participate in the state’s SWaM certification program. If the business also is owned and controlled by a woman, minority or service-disabled veteran, then it may obtain a certification to that effect. Although Virginia does not have any set-aside programs for SWaM-certified businesses, purchasing agencies target outreach programs at certified businesses and encourage large prime contractors to subcontract to SWaM-certified businesses.
Being Responsive to an Opportunity
The purchasing agency will only consider bids or proposals that are responsive to the Invitation to Bid or Request for Proposal. This boils down to a simple rule: follow the purchasing agency’s instructions.
Note that brand names listed in an Invitation to Bid or Request for Proposal are not a material requirement. Rather, the VPPA specifies that any equivalent product will suffice. Vendors not providing the brand name requested should include product literature and other evidence that will demonstrate to the purchaser that it would be getting an equivalent to the brand name product.
The VPPA uses the term “responsible” as a catch-all for the intangible qualities of a potential vendor. Officially, the purchasing agency needs only make a determination of responsibility in a competitive bidding situation. However, the same factors that determine responsibility in the competitive bidding likely also will be discussed by a panel determining the “best” proposal in a competitive negotiation situation. Further, these factors will probably also be, in one form or another, on the minds of agency personnel making non-competitive procurements. As such, businesses that want to be vendors to state and local government should ensure that they are responsible vendors with respect to the particular contracts they are seeking.
Ultimately, responsible vendors are those that select contracting opportunities that match their business’s abilities. Each purchasing agency’s purchasing rules define what factors it considers in making a responsibility determination. Fairfax County’s ten-factor list is illustrative. The factors center on whether (a) the business is capable of performing the contract and (b) the business has demonstrated that it can be trusted to perform in good faith.
Ways State and Local Government Contracts Differ from Contracts with Private Entities
State and local government contracts come with more strings attached than do contracts with private entities. This section details some of the key differences, including (1) increased oversight of compliance issue, (2) restrictions on making changes to bids or proposals, (3) mandatory administrative procedures for the appeal of purchasing agents’ decision, and (4) mandatory administrative procedures for resolution of disputes related to contract performance.
Heightened Compliance Oversight
Because the state and local government do not want to give money to businesses that are not adhering to state and local public policies—especially tax laws—businesses that receive procurement dollars come under particular scrutiny from the relevant enforcement authorities. Businesses that makes bids or offers for government contracts should expect to certify their compliance with Virginia state and local taxes—including local business licenses—and their compliance with federal immigration laws. For larger contracts, a business may also be required to certify that its hiring practices are non-discriminatory. Certain contracts also carry a requirement that the business certify a drug-free workplace.
These oversight requirements are magnified if a contract is funded by federal government grants, because the business then must comply both with the VPPA’s specific compliance requirements but also with the compliance requirements that Congress included with the grant. For example, construction projects funded with federal dollars may require certification that workers are being paid a “prevailing wage.” For this reason, potential bidders and offerors should carefully determine whether the contract they are examining comes with federal oversight.
The VPPA also contains stringent anti-bribery provisions, and businesses must be careful to heed those rules. In particular, businesses should avoid any significant gifts or other inducements to individuals who are making the contracting decisions for the government.
One additional restriction to be aware of: your marketing materials cannot suggest that the state or local government endorses your product or service. Be aware of this rule when designing your advertising after you obtain a contract.
Withdrawing a Bid/Offer
Businesses should expect that they will be held to the bid or offer they make to the government. In general, a business may withdraw its bid or offer at will before the deadline for submitting the bid or offer but may not withdraw its bid or offer once the deadline has passed.
The general rule has limited exceptions, such as an error totaling numbers on a construction contract bid. But a business’s regret of an intentionally low-balled offer is not an exception. For this reason, the business should be certain of its bid or offer before it submits it to the government.
Remedies for the Government Purchaser
A government purchaser has more remedies for a dispute against a vendor than does a private sector purchaser. As with private sector contracts, the government can sue the vendor for contract-related damages if it believes that the vendor breached the contract. But the government also has the administrative remedy of suspending the vendor’s right—and the vendor’s owner’s right—to participate in government procurement. The government may even permanently debar a vendor or individual.
With regard to identifying contract-related damages, contracts under the VPPA allow the purchasing agency to audit the books of the vendor for three years after completion of the contract. Nearly all private sector contracts would require both parties to go to court before they could have access to the other party’s books.
Remedies for Vendors for Contract Performance Problems
For contract performance-related issues, vendors have many of the same remedies against the government purchaser that they would have against a private sector purchaser, but the vendor must meet notice requirements before it may pursue contract damages.
First, a vendor must notify the purchaser if it has a claim for money or other relief related to its performance on a contract. The vendor should try to resolve any dispute amicably. If those efforts fail, the vendor must send a detailed description of the claim to the relevant purchasing agent. The purchasing agent then makes a decision on the claim within 30 days. If the purchasing agent rejects the claim, the vendor may appeal that decision to the circuit court within six months.
Remedies for Vendors for Contract Procurement Problems
Vendors also have remedies available under the VPPA that are not available in private sector contracts. These remedies primarily are focused on the decision of the individual or board making the final contracting decision.
A vendor may appeal the contracting officer’s determination that the vendor is not a responsible bidder, that the vendor is suspended or debarred, and/or that the vendor may not withdraw a bid or offer. A vendor who is not awarded a particular contract may also protest the contracting officer’s award of the contract to another vendor on grounds that required VPPA procedures were not followed or that the contracting officer improperly made the procurement on a non-competitive basis such as sole source or emergency.
Because the government wants to be able to start work quickly, these appeals generally must be made to the relevant circuit court within ten days of the decision to which the vendor objects. The odds are stacked against vendors in these appeals; the court will not reverse the contracting officer’s decision unless it finds that decision was arbitrary and capricious.
You can better position your business to take advantage of contracting opportunities with state and local government by knowing the basics of Virginia procurement law. Use eVA and your contacts with purchasing agencies to stay apprised of contracting opportunities. Respond to opportunities in a manner that presents your business as responsive and responsible by following directions and being capable of performing on the contract in good faith. Be aware of the particular ways that the parties must resolve conflicts let under the VPPA. With this knowledge in hand, you will open the door to the multi-billion dollar market for state and local government procurement in Virginia.