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Procurement of Airport Development and Planning Contracts (2012)

Chapter: VII. Consequences for Noncompliance

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Suggested Citation:"VII. Consequences for Noncompliance." 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 13

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14 3. A-133, Audits of States, Local Governments, and Non-Profit Organizations. See also the Catalog of Federal Domestic Assistance, Program 20.106. There are also important grant assurances that re- quire airports to retain inspectors to ensure that the work was performed in accordance with the plans and specifications and that require airports to maintain project accounting records to facilitate effective audit- ing. See Assurances 17 and 26. VI. PROTESTS The federal grant regulations contained in 49 C.F.R. § 18.36(11) and (12) provide that grantees and subgran- tees are required to maintain their own protest proce- dures for handling and resolving all procurement dis- putes and contractual and administrative issues. Federal review is limited to violations of federal law or regulations or violations of the local protest procedures that result in a failure to review the complaint or pro- test. See FAA AIP Handbook, Section 914. The chart contained at Appendix C identifies various state bid protest procedures. The protest procedures are sometimes found in state statutes. More often, however, they are set forth in the state administrative code for state contracts. Most local government entities have their own procedures. Frequently, airports that are op- erated as an independent local entity are not required to follow any particular procedure, as long as their practice complies with basic due process. Most protest policies are developed with the intention of minimizing disruptions to the procurement process. They usually require a notice of the protest to the airport that must be filed within a very short time frame, such as 3 busi- ness days. In addition, patent errors in the solicitation must be challenged prior to bid opening. Allowing bid- ders to challenge a patent error in a solicitation after the bids are made public undermines the integrity of the competitive process. See, e.g., Sheridan Corp. v. United States, 95 Fed. Cl. 141, 150 (2010). Some state rules set forth the precise contents of the protest. When there are no written procedures in place, a bidder may initiate legal action in the local court, which can be costly and time-consuming for all in- volved. Therefore, if an airport determines that there are no requirements that are directly applicable to it, it must enact its own procedures to provide bidders with the protest procedures required by 49 C.F.R. § 18.36. Given the vast number of procurements made each year, bid protest litigation at the state and local gov- ernment level is, surprisingly, not very common. Many states do not allow a disappointed bidder to initiate legal action in court. Compare United of Omaha Life Ins. Co. v. Solomon, 960 F.2d 31 (6th Cir. 1992) (bidder has no right to challenge award) with Pataula Electric Membership Corp. v. Whitworth, 951 F.2d 1238 (11th Cir. 1992) (Georgia case and statutory law mandating the award of a public contract to the "lowest responsible bidder" represents a rule or understanding sufficient to create a protected property interest) (opinion limited in application). Even when a bidder has standing and has exhausted its administrative remedies, the standard of review is extremely deferential to the government and relief is limited. See, e.g., Paul Jacquin & Sons, Inc. v. City of Port St. Lucie, 36 Fla. L. Weekly D. 1613 (Fla. 4th DCA 2011); T & A Utils. v. City of Panama City, 10 Fla. L. Weekly Fed. D. 484 (N.D. Fla. 1997). The more severe consequences for noncompliance are discussed below. VII. CONSEQUENCES FOR NONCOMPLIANCE The failure to comply with an AIP procurement re- quirement may result in the FAA determining the costs of a project to be ineligible. This can be a very severe consequence for an airport that does not have the abil- ity to fund a project on its own, but is already contrac- tually obligated to pay the contractor. Airports can at- tempt to limit their financial exposure by clearly stating in the contract that it is based upon the receipt of fed- eral funds, and if not received, the procurement, award, or contract may be terminated without recourse. In addition, if the FAA determines that an airport has failed to comply with any of the federal require- ments, the FAA may: • Terminate eligibility for grants pursuant to 49 U.S.C. §§ 47106(d) and 47111(d). • Suspend or deny the payment of grant funds. • Withhold approval of any new application to im- pose a PFC (for revenue diversion violations). • Direct the refund of fees unlawfully collected. • Issue any other compliance order to carry out the provisions of the grant assurances, such as requiring a written corrective action plan that will ensure compli- ance with all requirements. The FAA may also impose sanctions as provided for under 49 C.F.R. Part 26 and may, in appropriate cases, refer the matter for enforcement under 18 U.S.C. § 1001 or the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. § 3801). The remedies available to the FAA for the violation of a grant assurance are generally prospective in na- ture—the withholding of future grants or future pay- ments under outstanding grants. These remedies are designed to address ongoing compliance issues by pro- viding financial incentives for correcting continuing violations of the grant assurances. See Yager & Associ- ates v. Toledo-Lucas County Port Authority, 1998 FAA LEXIS 1133 (FAA 1998). The FAA does not generally find sponsors in noncompliance for past compliance violations that have been or are being cured. The FAA's Airport Compliance Program is designed to achieve voluntary compliance with a sponsor's federal obliga- tions and recognizes that voluntary corrective action is the means to cure compliance violations. Therefore, the FAA generally considers the airport’s most current ac-

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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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