Volume 3, Issue 1
Newsletter of the Rees Broome Construction Law Group
Winter / Spring 2014

     


Potential Roadblock to the Recovery of Claims

By Andy Felice

A recent decision in a case by the United States District Court for the Western District of Virginia may have a far reaching impact upon contractors working on projects administered under the Virginia Public Procurement Act (the “Act”).  The contractor in the case was awarded a jury verdict in the amount of $515,000 on its breach of contract claim for extra work. That recovery was subsequently reduced by the Federal Court to $142,558.00 based upon the application of §2.2-4309 of the Act. Section 2.2-4309 of the Act limits the amount that a fixed-price contract may be increased to no more than 25% of the amount of the contract or $50,000, whichever is greater, without an advance approval of the Governor or his designee, in the case of state agencies, or the governing body, in the case of political subdivisions. In this particular case, the contractor argued unsuccessfully that the “25% cap” did not apply to contract disputes or legal actions. When all prior change orders issued to the contractor were taken into consideration, only $142,558.00 remained available to fit within the “25% cap” on the total value of the fixed-price contract.

While this case is currently on appeal, it serves as a valuable warning to contractors who are operating on state and local government projects that they may be unable to recover payment rightfully due if the aggregate of all change orders on the project exceed 25% of the value of their fixed-price contract and the change order work was performed without first obtaining written approval authorizing an increase in the value of the contract above the statutory cap. Thus, contractors need to be aware that their ability to recover for valid change order and extra work may be adversely impacted by the subsequent application of the “25% cap” should Section 2.2-4309 of the Act be applicable to their contract.

As with any issue that may ultimately affect your company’s ability to be properly compensated for its work, early consultation with your construction attorney may prove extremely helpful to your bottom line.

 

  • Bruce Titus
  • Joe Kasimer
  • Steve Annino
  • Mark Graham
  • Andy Felice
  • Joe Pierce
  • Maureen Carr
  • Gina Schaecher
  • Alison Mullins
  • Jordy Murray

Spring Contract Review Reminder

Now that spring has finally arrived, it is a good time to review your standard contracts, subcontracts, purchase orders and other form documents to ensure that these documents contain terms which may best benefit your company during the upcoming year.  To schedule a review of your contract documents please call or email one of the members of the Rees Broome, PC Construction Law Group.


Issue Highlights

Potential Roadblock to the Recovery of Claims  
   
Virginia Procurement:  Low Bidder vs. Best Value  
     
Profiles:
Gina Schaecher
Jordy Murray
Alison Mullins
 
 
     

Virginia Procurement:  Low Bidder vs. Best Value
By  Jordy Murray

Except for certain enumerated exceptions, competitive sealed bidding is generally the only available method for Virginia’s department and agencies to procure goods and services, including construction services.

The Virginia Public Procurement Act, Code § 2.2-4303(A) states that “[a]ll public contracts with nongovernmental contractors for the purchase or lease of goods, or for the purchase of services, insurance, or construction, shall be awarded after competitive sealed bidding, or competitive negotiation as provided in this section, unless otherwise authorized by law.” (Emphasis added.)

In its April 2012 decision of Professional Building Maintenance Corporation (“PBM”) v. School Board of the County of Spotsylvania, the Supreme Court of Virginia reversed the judgment of the circuit court and held that the School Board’s contract for custodial services did not fall within any of the Act’s exceptions and that competitive sealed bidding was the proper method for contractor selection.

At issue in this case was the School Board’s use of a “best value” approach to selecting its custodian services contractor. The School board had issued a bid invitation (--not a request for proposal) which set forth certain criteria for selection of the successful bidder. This criteria included: expertise and experience relative to the scope of services (50 points); experience of personnel assigned to the project (5 points); supplies/equipment proposed for general cleaning (5 points); quality control program (10 points); and price (30 points). Despite PBM being the apparent low bidder, the School Board’s criteria resulted in contract award to another contractor.

In response, PBM sent a letter to the School Board stating its concern that the bid selection process was not fair and objective. PBM also met with School Board representatives to discuss its bid and the points awarded by the School Board to each bidder; after which, PBM submitted a formal bid protest. The parties met once again before the School Board confirmed in writing that PBM would not be awarded the contract. PBM responded by initiating legal proceedings.

Despite the School Board’s attempt to use subjective “best value” criteria in its procurement process, the Court held that the Act’s “competitive sealed bidding” language required award of the contract to the lowest responsive and responsible bidder.
The Act defines a responsive bidder as one “who has submitted a bid that conforms in all material respects to the Invitation to Bid.” Code § 2.2-4301. The responsiveness of PBM’s bid was not at issue.

Although the PBM Court recognized the Act does permit contract awards to a “best value” bidder, it also noted that such procurements are limited to design-build or construction management contracts, where the bidder or offeror submits an acceptable proposal, which is determined to be the best value.

Moreover, the PMA Court held the criteria and basis of evaluating bids must be stated in the Invitation and the evaluation of the bids must be in accordance with such criteria.

Review Invitations for Bid for Proper
“Competitive Sealed Bidding” Elements

Code § 2.2-4303 (D) provides that construction may be procured only by competitive sealed bidding, except competitive negotiations may be used to procure fixed priced design-build or construction management services. Competitive sealed bidding is defined as “a method of contractor selection, other than for professional services.” Code § 2.2-4301. When procuring a contract under the competitive sealed bidding process, Virginia procurement must include certain elements, which are generally described below:

  1. Issuance of a written Invitation to Bid, which incorporates by reference the specifications and contractual terms and conditions applicable to the procurement;
  1. Public notice of the Invitation to Bid at least 10 days prior to the date set of receipt of bids by posting to the Department of General Services’ central electronic procurement website.
  1. Public opening and announcement of all bids received;
  1. Evaluation of bids based upon the requirement set forth in the invitation;
  1. Award to the lowest responsive and responsible bidder

---------------------------------------

So you learn that you are the apparent low bidder, but the public
body determines you are not responsible; what next?

  1. The public body must notify you and permit you to inspect the documents related to its determination of responsibility;
  1. Should you elect to submit rebuttal information, the public body must issue a written determination of responsibility taking into account your rebuttal information; and 
  1. If you take exception to this determination, consider consulting with legal counsel and filing a formal protest.

Profiles

Gina Schaecher

Gina has over twenty years of experience representing business clients in commercial disputes in state and federal court.  She has served as lead counsel in lengthy complex commercial litigation in courts throughout the United States.  Gina currently focuses her practice on the representation of owners, general contractors, subcontractors, and design professionals in construction disputes, corporate governance matters, and general commercial litigation. Gina also successfully represents contractors’ interests in bid protests and contract claims on public projects before various boards of contract appeals including the General Services Board of Contract Appeals and the District of Columbia Contract Appeals Board. 

When not representing her construction clients in litigation and alternative dispute resolution proceedings, Gina donates her legal experience and time to advocate for the rights of family farmers in administrative proceedings in addition to animal protection and animal welfare matters at local and federal levels.


Jordy Murray

Jordy Murray joined Rees Broome in 2013. Jordy graduated from the Colorado School of Mines with a civil engineering degree and the University of Denver with an MBA, before pursuing his law degree and graduating from Washington and Lee University in 2004.

With more than twenty years of experience in the construction field, as engineer, project manager, and cost/schedule delay consultant, Jordy is adept at understanding complex construction issues and providing competent legal advocacy aimed at resolving challenging construction disputes. His clients include contractors, subcontractors and owners.

While most of his practice involves construction litigation, Jordy also provides diverse construction advisory, including contract formation and procurement, change order management, claims avoidance, project delivery systems, and general project or business management.

Alison Mullins

Alison R. Mullins, an associate at Rees Broome, PC, focuses her practice on all aspects of commercial dispute resolution. In particular, she often represents architects, engineers, and others involved in the construction industry. 

Alison received her J.D. from Roger Williams University School of Law in Bristol, Rhode Island.  Before entering the private practice of law, Alison started her legal career as a contracts manager and in-house counsel at a large architectural firm in Northern Virginia.  She is admitted to practice in Virginia, Maryland and the District of Columbia.

Alison is on the Board of Governors and Membership Chairperson of the Virginia State Bar Construction and Public Contracts Law Section, an Allied Professional member of the American Institute of Architects, Northern Virginia and District of Columbia Chapters, and the Social Events Chairperson for the Northern Virginia Chapter of Virginia Women Attorneys Association.

Alison is an author/co-author of several articles in industry periodicals, as well as a frequent presenter on construction industry, and legal related, topics. 

When Alison is away from the office, she enjoys spending time going to country (and other) music concerts, running marathons, or relaxing with her husband and two dogs.

 

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This Rees Broome, PC newsletter is intended solely for use by its clients and subscribers and may not otherwise be reproduced or used without permission of Rees Broome, PC. The information contained herein is generally reliable but independent consultation with counsel should be engaged to confirm the applicability of the information to your circumstances.

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