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Procurement of Airport Development and Planning Contracts (2012)

Chapter: IV. Identify the Appropriate Selection Method and Basis for Award

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Suggested Citation:"IV. Identify the Appropriate Selection Method and Basis for Award ." National Academies of Sciences, Engineering, and Medicine. 2012. Procurement of Airport Development and Planning Contracts. Washington, DC: The National Academies Press. doi: 10.17226/22712.
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Suggested Citation:"IV. Identify the Appropriate Selection Method and Basis for Award ." National Academies of Sciences, Engineering, and Medicine. 2012. Procurement of Airport Development and Planning Contracts. Washington, DC: The National Academies Press. doi: 10.17226/22712.
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Page 9
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Suggested Citation:"IV. Identify the Appropriate Selection Method and Basis for Award ." National Academies of Sciences, Engineering, and Medicine. 2012. Procurement of Airport Development and Planning Contracts. Washington, DC: The National Academies Press. doi: 10.17226/22712.
×
Page 10
Page 11
Suggested Citation:"IV. Identify the Appropriate Selection Method and Basis for Award ." National Academies of Sciences, Engineering, and Medicine. 2012. Procurement of Airport Development and Planning Contracts. Washington, DC: The National Academies Press. doi: 10.17226/22712.
×
Page 11

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9 IV. IDENTIFY THE APPROPRIATE SELECTION METHOD AND BASIS FOR AWARD A. Sealed Bid Method 1. Advertisement Requirements Once the project scope and basic contract terms have been developed, airports must determine which selec- tion method applies. On federal grant-funded projects, when there is a defined scope of work with an estimated value exceeding $100,000, a contract for construction services or equipment must be publicly advertised, unless one of the enumerated exceptions apply. See Sec- tion C, below. The advertisement must contain suffi- cient information so that the general public will know the nature of the project, how interested companies can bid on the work, when the bids are due, and the date, time, and place of the bid opening. The advertisement must also identify any criteria that will be used in evaluating the qualifications of the bidder and the re- sponsiveness of the bid. The evaluation criteria may not be prescribed after responses have been received. 49 C.F.R. § 18.36 generally requires public adver- tisement but does not provide specific advertising re- quirements. State laws often provide the detailed re- quirements, such as the number of days the advertisement must be published and the manner of publication (e.g., often requiring advertisement in a local newspaper of general circulation). The general rule is that bid opening should occur at least 30 days after the advertisement is published and the bid docu- ments are made available. More complex projects may require more time, and simple projects may allow less time, as long as state laws are followed. See FAA AIP Handbook, Section 914(c). Federal grant-funded projects can require contrac- tors to become prequalified to submit a bid for a con- struction contract, as long as the prequalification re- quirements are not overly restrictive. See FAA Advisory Circular, 150/5370-10E, Section 20-02. Although virtually every state has a sealed bidding statute that applies to construction services and equip- ment, there are exceptions to the sealed bidding re- quirement, including alternative delivery methods and various thresholds over which sealed bids must be ob- tained. See Appendix B. The first column in Appendix B identifies the state statutes that require awards be made to the lowest responsible and responsive bidder. The second column identifies the various state statutes that allow alternative delivery methods, such as design- build and CMAR. The last column identifies the state statutes that address exceptions from competition, such as dollar thresholds over which competition is required. Appendix B is not an exhaustive listing of all procure- ment statutes, but is intended as a starting point for further research. Careful analysis of the competitive procurement statutes will be required to determine their applicability in any given situation. In some states, the statutes have broad application, meaning that they apply to all construction projects by all public entities. Other states differentiate between state con- tracts and local contracts. When the funding may not be sufficient to cover the entire scope of a project, the bid documents may either divide the project into a base bid with alternates or pro- vide different alternatives for the project to allow the airport to select the best option that matches the funds. In that case, the bid documents must clearly set forth how the low bid will be determined. Generally, the low bidder should be selected based on the combination of base bid plus alternates that most closely matches the available funding for the project. See FAA AIP Hand- book, Section 913. When there are multiple possible ways in which the award could be made, there is the possibility that the award could be challenged as arbitrary. To be AIP- eligible, the airport must establish a reasonable objec- tive standard that will be applied in making the award. Id. For example, the bid documents could set forth the order in which the alternates will be combined until the maximum amount of funding is reached. Another option would be to set the parameters for determining how the award will be made, such as if the lowest bid exceeds a certain price, then the alternate will be awarded if the lowest bid on the alternate comes within the acceptable range. These are merely examples. Whatever the stan- dard is, it should be established prior to the opening of the bids and should be capable of being applied objec- tively, to be fully AIP-eligible. Otherwise, AIP funds will be limited to the lowest responsive bid. Id. 2. Bid Evaluation Under the sealed-bid method, contracts for construc- tion and equipment must be made to the lowest respon- sive and responsible bidder. It is important to note that the basis for award is not simply the lowest bidder. See, e.g., Irwin R. Evens & Son, Inc. v. Board of Indianapo- lis Airport Auth., 584 N.E.2d 576 (Ind. App. 1992). The low bid must also be responsible and responsive. Re- sponsive means that the bid complies with all of the material terms of the solicitation. Although a determi- nation of responsiveness is made by analyzing the bid, without reference to outside materials, making a re- sponsiveness determination is not always simple. For example, airports will need to determine whether the bidder has complied with the DBE participation goal and, if not, whether good-faith efforts have been met.9 When determining responsiveness, the airport must analyze whether the bid contains any errors or irregu- larities. Whether an airport has authority to waive a bid irregularity or allow a bidder to rescind a bid will be determined by state law. See FAA Advisory Circular, 150/5370-10E, Section 20-08; see, e.g., Powder Horn 9 Even when the bidder has not met the DBE participation goal, the contract may be awarded if the bidder has docu- mented that it acted affirmatively in trying to meet the goal, such as actively soliciting DBE firms and using bids from DBE firms when possible.

10 Constructors, Inc. v. Florence, 754 P.2d 356 (Colo. 1988). Usually minor irregularities, such as obvious mathe- matical or typographical errors, can be corrected. See, e.g., Dillingham Constr., Inc. v. Milwaukee Metro. Sew- age Dist., 629 F. Supp. 406 (E.D. Wis. 1986) (bidder's failure to fill in the penal sum of bond was not material when the bond was not required by law); see also Dick Corp. v. Associated Elec. Co-operative, Inc., 475 F. Supp. 15 (W.D. Mo. 1979) (allowing correction of $1 million typographical error under equitable reformation princi- ples). Material irregularities, however, cannot be waived. See, e.g., Bleccs, Inc. v. Augusta, 2009 U.S. Dist. LEXIS 126458 (S.D. Ga. 2009) (failure to properly notarize bid documents); Balsbaugh v. Commonwealth Dep't of Gen. Servs., 815 A.2d 36 (Pa. 2003) (lack of signature on bid is material); Interstate Rock Prods. v. United States, 50 Fed. Cl. 349 (Fed. Cl. 2001) (finding no abuse of discre- tion when agency declared bid nonresponsive for failure to include the penal sum on a required bid bond); Kokosing Constr. Co. v. Dixon, 594 N.E.2d 675, 680 (Ohio App. 1991) (stating that for a bid to be rejected as nonresponsive, the deviation must both be substantial and provide the bidder an advantage over its competi- tors). Generally, when analyzing procurement challenges involving bid errors, the issue is whether the airport acted arbitrarily in its decision and whether the bidder obtained any competitive advantage by committing the error. Interstate Rock Prods. v. United States, 50 Fed. Cl. 349 (2001). Courts accord local government deci- sions with great deference. See, e.g., Paul Jacquin & Sons, Inc. v. City of Port St. Lucie, 36 Fla. L. Weekly D 1613 (Fla. 4th DCA 2011) (“Even if the public entity makes an erroneous decision about which reasonable people may disagree, the discretion of the public entity to solicit, accept and or reject contract bids should not be interfered with by the courts, absent a showing of dishonesty, illegality, fraud, oppression or miscon- duct.”). Airports usually have wide discretion to reject all bids or cancel a solicitation for any reason, though a justification is recommended. See, e.g., Paul Wholesale B.V./Hols Trading, GMBH, J.V. v. Alaska, 908 P.2d 994 (Alaska 1995). The lowest bidder also must be responsible, meaning that it meets the minimum qualifications set forth in the bidding documents. See 49 C.F.R. § 18.36(b)(8) (re- quiring that awards be made only to responsible con- tractors possessing the ability to perform successfully the terms and conditions of the contract). Factors for consideration include integrity, compliance with public policy, past performance, and financial and technical resources. Id. When considering past performance, an airport may consider a firm’s past claims or litigation history. See FAA Advisory Circular 150/5100-14D, Sec- tion 2-7 (listing selection factors, including the capabil- ity of the firm to complete projects without having ma- jor cost escalations or overruns and the reputation of the key personnel). One court recently summarized California law on de- termining a bidder’s responsibility as follows: A truly nonresponsive bid may be summarily denied by a public entity even if the bid is otherwise monetarily the best for the entity. On the other hand, a determination of nonresponsibility entitles the bidder to a hearing where certain minimal elements of due process must be afforded before the contract can be awarded to the next-best bid- der. See Great West Contractors, Inc. v. Irvine Unified School Dist., 187 Cal. App. 4th 1425 (Cal. 4th App. 2010). On AIP projects, airports must obtain FAA concur- rence whenever they reject an apparent low bid or when a bidder objects that the lowest bidder is nonresponsible or that the low bid is nonresponsive. See FAA AIP Handbook, Section 904. In addition, when a project is federally funded, airports cannot accept a bid from a contractor who is listed on the excluded parties list or from any bidder in which an ineligible contractor has a substantial interest. See OMB Guidance, 2 C.F.R. Part 180. Appendix D contains a flowchart that depicts the se- quence of a typical sealed-bid procurement of construc- tion services and equipment. B. Competitive Proposals The federal regulations limit the use of competitive proposals to situations when “conditions are not appro- priate for the use of sealed bids.” 49 C.F.R. § 18.36(d)(3). When sealed bids are not feasible (be- cause, for example, the precise scope of work is not de- fined), the airport may issue a request for proposals (RFP) for construction services or equipment, as long as this procurement method is allowed by state and local laws. The third column of Appendix B, titled “Propos- als,” contains the state statutes that may allow the RFP selection method for equipment and construction ser- vices. Each state statute should be evaluated in detail because some states allow the public entity broad dis- cretion in using this procurement method whenever they deem it appropriate, while other states limit the use of the RFP method to certain defined situations. Other state statutes are silent as to whether the pro- posal selection method is allowed. In those cases, a close examination of the statute requiring sealed bids should be made to determine if, in fact, that is the only method allowed for the public procurement of construction and equipment. If there are no procurement statutes that apply to the airport, then the airport can establish its own procurement process that allows for procurement by competitive proposals, as long as it has authority to do so. Airports should limit this method to situations when sealed bids are not feasible if they intend to use federal funds for the project. When proposals are solicited, the selection is not lim- ited to the lowest price but may be based upon a num- ber of other factors that are set forth in the RFP. The RFP typically asks the proposer to explain its approach to the project, as well as submit the qualifications and

11 experience of the proposer and its personnel. The RFP must specify the selection criteria, award process, and scoring method, if any, that will be used in evaluating the proposals. Airports have broad discretion in deter- mining the evaluation factors that apply and their rela- tive importance. See, e.g., JWK Int'l Corp. v. United States, 279 F.3d 985, 988 (Fed. Cir. 2002) (agency may give non-cost factors greater weight than cost factors). Even though airports have broad discretion in evaluat- ing proposals and making procurement decisions, the decisions still must have a rational basis. See, e.g., Sheridan Corp. v. United States, 95 Fed. Cl. 141 (2010). When addressing the advertisement requirements for RFPs, 49 C.F.R. § 18.36 uses a slightly different phrase, requiring only that the RFP be “publicized,” as opposed to requiring sealed bids to be “publicly adver- tised.” Some have argued that RFPs may be pursued without a publicly advertised RFP. The rationale is that 49 C.F.R. § 18.36(d)(3)(ii) only requires that proposals be solicited from an “adequate number of sources.” Ap- parently, in determining whether costs are allowable, the FAA has agreed that there is a distinction between “publicized” and “publicly advertised.” See Yager & As- sociates v. Toledo-Lucas County Port Authority, 1998 FAA LEXIS 1133 (FAA 1998) (“in regard to allowable cost policy—under Part 18, it has been the FAA practice to accept that “publish” and “publicize” include the ac- tions of informing the specific consultants concerned, verbally.”). The best approach, however, is to publicly advertise the RFP, since the distinction between pub- lish and publicize is somewhat tenuous, public ad- vertisement is often required by state law, and the consequences for noncompliance can be severe. Adver- tisement may also better accomplish the practical goal of increasing the pool of qualified proposers. Proposals must be evaluated based upon the criteria set forth in the RFP. Airports can exercise reasonable discretion in determining the scope and weight of a given evaluation factor. See, e.g., PlanetSpace Inc. v. United States, 92 Fed. Cl. 520, 536 (2010). Undisclosed factors cannot be considered. See, e.g., Latecoere Int'l, Inc. v. U.S. Dep't of Navy, 19 F.3d 1342 (11th Cir. 1994). The award is made based upon which proposal is the “best value” or is the “most advantageous” or other similar phrase that is set forth in the RFP and state law. Because an RFP has a price component, it cannot be used to solicit professional services. Other prerequi- sites for the use of the RFP method are contained in 49 C.F.R. § 18.36(d)(3). A flowchart depicting a typical RFP process is located at Appendix E. C. Alternative Delivery Methods 1. Design-Build Projects Congress has authorized the FAA to approve funding for design-build projects that follow a selection process that is permitted under state or local law, so long as there are at least three competing bids for the project and the Administrator is satisfied with the selection process, the contract form, and the schematic design. See 49 U.S.C. § 47142 (2009). Design-build projects can be procured using the same QBS method that is used for professional services (discussed in Section D below), or they can be procured using a competitive proposal process, whereby technical points are evaluated along with pricing information to determine the most advan- tageous contract (as discussed in Section B above). See FAA AIP Handbook Sections 930 and 931. When using FAA grant funds for a design-build pro- ject (including AIP), the airport must obtain preap- proval from the FAA, including preapproval of which selection method is to be used. The vast majority of states have statutes that specifically address design- build procurements. See Appendix D. The state statutes that are specific to the design-build delivery method will be the starting point for determining which selec- tion method can be used for design-build projects. For example, if state law requires a QBS method, then that will be the only procurement method allowed. If, how- ever, the state statute allows various options, then the airport will have more flexibility in structuring the pro- curement. See, e.g., Fla. Stat. Section 287.055(9) (allow- ing multiple options, including QBS or RFP, consistent with the AIP Handbook). 2. Construction Manager at Risk For AIP-funded projects, the FAA allows airports to procure a CMAR contract as an alternative to the tradi- tional design-bid-build sealed bid and RFP selection methods. CMARs are procured “at the early stage of design” before sealed bids are feasible. Instead, the air- port selects the CMAR entity based upon qualifications and then “negotiates a ceiling amount for the construc- tion.” See FAA AIP Handbook, Section 930. This alter- native is consistent with the AIP statute that requires airports to use the QBS method for “program manage- ment, construction management…and related services.” See 49 U.S.C. § 47107(a)(17). The federal grant regulations, at 49 C.F.R. § 18.36(t), also require a QBS method for architectural, engineer- ing, and “certain other related services.” Specifically, Federal Aviation Administration (FAA) grantees and subgrantees shall extend the use of qualifications-based (e.g., architectural and engineering services) contract se- lection procedures to certain other related areas and shall award such contracts in the same manner as Federal con- tracts for architectural and engineering services are nego- tiated under Title IX of the Federal Property and Admin- istrative Services Act of 1949, or equivalent State (or airport sponsor for FAA) qualifications-based require- ments. 49 C.F.R. 18.36(t). This is also consistent with many state statutes that allow CMAR procurements to be based upon qualifica- tions and subject to competitive negotiation. See Ap- pendix B. The statutes referenced in Appendix B are the starting point for determining which selection method can be used for CMAR procurements. For ex- ample, if state law requires the sealed-bid method on all construction contracts and does not have a specific

12 statute addressing CMAR, then using a QBS method would not be permissible. 3. Task-Order Contracting For AIP-funded projects, the FAA allows airports to use an alternative delivery method known as task-order contracting. See FAA AIP Handbook, Section 930(b). Before the scope of each project is fully defined, airports can publicly solicit competitive proposals, select the contractor based upon the published criteria, including price (“standard fees and unit rates”), and then award individual “tasks” using those fees and rates. 49 C.F.R. § 18.36(d)(3); FAA AIP Handbook Section 930. The FAA AIP Handbook explains that this exception is limited to tasks that can be completed within 1 year, unless FAA approval is obtained. Id. Otherwise, the costs that ex- ceed the 1-year period may be deemed ineligible. See FAA AIP Handbook Section 930(b). The task-order method dispenses with the require- ment for public advertisement of each individual pro- ject. Id. The basis of award is the “most advantageous to the program, price and other factors considered.” See FAA AIP Handbook, Section 930. This method is differ- ent from the sealed-bid method because price is not necessarily the determinative factor, and it is also sig- nificantly different from the QBS method because price must be one of the considered factors. Id. As previously explained, state and local require- ments will still apply and may restrict the use of this method by requiring public advertisement or competi- tion for projects that exceed a certain value or esti- mated amount. If this alternative method is allowed by state law, airports may want to use this method for pro- curing a pool of prequalified contractors that will be able to quickly bid on projects as they arise. D. Qualifications-Based Selection—Professional Services Professional services are generally defined as “con- tracts and subcontracts for program management, con- struction management, planning studies, feasibility studies, architectural services, preliminary engineering, design, engineering, surveying, mapping and related services.” 49 U.S.C. § 47107(a)(17) (2009). Airports may also require cost estimating services and owner’s authorized representatives (OARs) to assist with the management of large construction projects. Airports can procure cost estimating services by follow- ing their local procedures because the fees typically fall under the small purchase threshold. OAR fees, how- ever, can be quite substantial on large projects, depend- ing upon how the airport is staffed and the scope of ser- vices that are needed. When an OAR provides program management services or performs substantial engineer- ing services or full-time, on-site construction inspection services, the following “qualifications-based” selection method must be used. See FAA Advisory Circular 150/5100-14D, Section 1-5 (listing the special services that the FAA considers to be professional). Otherwise, for “extension of staff” services that are nonprofessional and nonconstruction services, airports should follow their local procurement procedures. The solicitation of professional services must be qualifications-based, meaning that the interested firms must be ranked in order of the “most qualified” without considering any pricing, fee, or profit information. See 49 U.S.C. § 47107(a)(17) (2009) (AIP requires compli- ance with the Brooks Act “or equivalent qualification- based procedure prescribed by or for the sponsor.”). When procuring professional services using a QBS procedure, airports must: • Adequately publicize the request for qualifications (RFQ). • Identify all evaluation factors and their relative importance in the RFQ. • Specifically identify all projects to be covered by the agreement (limited to those that are anticipated to be constructed within 5 years of the contract date). • Have a method for conducting evaluations and ranking the firms that is in place prior to the RFQ. • Negotiate a fair and reasonable price with the most qualified firm. The key to establishing a successful QBS process is to be able to demonstrate how the selected firm is, in fact, the most qualified, based upon objective, measur- able standards. Because qualifications are inherently subjective, the factors to be considered need to be documented in advance of the selection. The selection factors typically include: • The firm’s capability to perform. • The firm’s experience in past projects of a similar nature. • Qualifications of key personnel. • Current workload (ability to meet schedule). • DBE compliance. • Knowledge of FAA standards and practices (e.g., Davis-Bacon compliance, if applicable). • Understanding of project requirements. Often, the QBS procedure will involve two stages. First, the airport selects a shortlist of the most qualified and invites those selected to make presentations re- garding their qualifications and their approach for the specific project. The presentation allows the airport to interact with, question, and interview the key personnel and develop confidence in the firm’s ability to meet the needs of the airport. The firm can explain its experience and general approach to the project and demonstrate its understanding of the airport’s needs for the project. Sometimes state law will allow the airport to issue the RFP to the shortlisted firms. The RFP provides the firms with more detail about the project and allows the firms to create and present a general schematic design. After the firm presentations, the airport will rank the firms in order of preference. Usually the airport will use a selection committee comprised of qualified indi- viduals to evaluate the qualifications and recommend

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TRB’s Airport Cooperative Research Program (ACRP) Legal Research Digest 16: Procurement of Airport Development and Planning Contracts provides guidance on how to determine which requirements apply to any given procurement process.

The report also includes an overview of the consequences for noncompliance with procurement laws or regulations in order to help airports better understand the inherent risks associated with various funding sources.

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