Federal Design-Build Bidding Reform: DOD Caps Design-Build “Short Lists”March 31, 2015
Did you know that bidders on federal design-build contracts spend, on average, roughly $260,000 just to participate in the procurement process? Concerned that the high price of admission is dissuading qualified contractors from bidding, legislators recently enacted several reforms intended to make the bidding process more efficient. Among them is Design-Build Bidding Reform Section 814 (the “Reform”), enacted on December 19, 2014 as part of the National Defense Authorization Act for Fiscal Year 2015.1
The Reform limits the number of bids that may be considered for the second phase of two-phase requests for competitive proposals on Department of Defense (DOD) agency contracts valued at $4 million or more. Contracting Officers are now required to limit the field to five finalists and may exceed this limit only if they (1) provide written documentation showing how doing so would be consistent with the objectives of the two-phase selection procedures, and (2) obtain approval from the head of the agency contracting the activity, i.e., the U.S. Army Corps of Engineers or the Commanding Rear Admiral of the Naval Facilities Engineering Command. These requirements are narrowly designed to limit the application of the “expanded list” exception.
The rationale behind the Reform is to encourage participation in the bidding process while conserving costs to bidders and the Government. By culling underqualified candidates at an earlier, less-expensive stage of the proposal process, the Reform minimizes cost disincentives for potential bidders, who will be more inclined to participate under reduced financial exposure. Contractors who are selected in the first phase can proceed with the knowledge that they have significantly higher chances of succeeding before committing the resources required to compete effectively. For its part, the Government saves time and money by eliminating the need to evaluate proposals that have no real chance of success.
The measure may be celebrated by smaller firms for lowering barriers to entry, but larger contractors should be wary of an increase in competition and a “bidder cap” that could prevent participation in circumstances where more than five qualified contractors exist. Although making the “best five” will depend to some extent on the discretion of the Contracting Officer, bidders may avoid being left on the outside looking in by placing greater emphasis on their technical qualifications during the first phase of selection, including their experience, technical competence, overall capabilities, and past performance. In any event, contractors can take comfort in knowing that although the procurement of DOD work will remain fiercely competitive, they will no longer have to spend several hundred thousand dollars just to enter the race.
1The Reform is now codified at 10 U.S.C. § 2305a(d).