Nearly all public construction work in Massachusetts requires some form of certification or prequalification of bidders. Contractors should be aware of two recent developments in this arena – one affecting horizontal construction for the Department of Conservation and Recreation (“DCR”), and one affecting vertical construction subject to certification by the Department of Capital Asset Management (“DCAM”).
DCR to adopt MassDOT prequalification
The Department of Conservation and Recreation has proposed to merge its regulations for the classification and rating of prospective bidders with MassDOT’s regulations. The change would rescind the current regulation governing DCR prequalification and add a new regulation providing that all bidders on DCR non-building projects of $50,000 or more “must be prequalified by the Highway Division of the Massachusetts Department of Transportation.” The DCR held a public hearing on the proposed regulations on May 8, 2012, and aims to finalize the proposed regulations by about July 15, 2012.
While the goals in merging the prequalification regulations are to streamline the prequalification process and eliminate duplication, and the intent, ultimately, is that the changes will benefit contractors, there are a number of practical issues that are being considered by DCR.
One such issue involves the different formulas currently used for determining contractor rating and limits by DCR and MassDOT. For example, the current DCR regulations take into account numerous factors in determining a contractor’s “rating,” such as the contractor’s financial statement, supplementing documents, and “competency and responsibility as indicated by the amount and condition of equipment, experience of principal personnel and … previous experience record with [DCR] and other awarding authorities.” The MassDOT regulations, on the other hand, base a bidder’s “Maximum Capacity Rating” solely on the bidder’s bonding capacity. These different approaches mean that bidders who are prequalified under the current DCR regulations may be precluded from bidding on certain jobs under the new regulations. At the May 8 hearing, the DCR indicated that it was concerned about this potential adverse impact of the merger, and that it will investigate the issue.
Another issue that will need to be resolved concerns merging the categories of work between the two agencies. The DCR has several areas of work that are unique to DCR, and that will not fit neatly into the MassDOT categories, such as work concerning wetlands. One option discussed during the hearing was to provide an explicit “crosswalk” to contractors with existing prequalification under any of DCR’s categories that will direct the contractors to the corresponding MassDOT category, so that the contractors will know which MassDOT categories they should apply under.
DCR and MassDOT have discussed implementing a “grace period” for contractors who are prequalified under the current DCR regulations, but whose applications under the corresponding MassDOT categories have not yet been approved. During the grace period, those contractors would remain eligible to bid for work within the categories for which they are approved. MassDOT has indicated that it will give priority for processing to any pending prequalification applications from DCR applicants.
Massachusetts Supreme Court rules that investigation of bidders is not limited to DCAM certification materials
Bidders on all but the smallest public building projects must be certified as eligible by DCAM. The DCAM certification process involves scrutiny and scoring of the contractor’s financial health and bonding capacity, its experience on projects of various sizes and types, and the qualifications of its key personnel. It also involves an evaluation of the contractor’s performance on both private and public jobs over the prior five years. Public awarding authorities are required to submit contractor evaluations to DCAM upon completion of a project; private owners may, but are not required to, submit evaluations. These evaluations, together with the contractor’s own responses to the evaluations, are kept in DCAM’s certification file.
Bidders must submit their certification of eligibility from DCAM with their bids, along with an update statement reflecting projects completed since the date of the certification. Under DCAM’s regulations, awarding authorities are required to review the information in the DCAM certification files and the update statements in determining whether a bidder is “responsible and eligible.”
In a case decided last month by the Massachusetts Supreme Judicial Court, the issue was whether an awarding authority was permitted to perform its own investigation of a bidder, going beyond the information in the DCAM files. After soliciting and receiving bids for the construction of a new police station, the Town of Holliston reviewed the DCAM file for the low bidder, Barr Incorporated, and did an internet search.
Concerned with what it found, the Town asked one of its detectives to investigate Barr’s projects further. The detective contacted several municipalities that had hired Barr in the past, and determined that most of them had had negative experiences. In light of this information and the information in the DCAM files, the Town found that Barr was not a “responsible” bidder and disqualified its low bid.
Barr sued to enjoin the award of the contract to the next lowest bidder. It argued that allowing awarding authorities to conduct their own investigations outside the DCAM files would open the door to favoritism: awarding authorities will “perform only cursory review of preferred bidders while searching for flaws in disfavored firms.” (In fact, the Town admitted that it performed a more thorough investigation of Barr than it did of the other bidders, because of what its initial inquiry revealed.)
The court held that the Town was not precluded from looking beyond the DCAM files to determine whether a bidder is responsible. Nothing in the statute expressly precludes it from doing so, and the statute makes clear that the ultimate decision as to whether a bidder is responsible rests with the awarding authority, not DCAM. The court also noted that since the DCAM files are not comprehensive (for instance, they exclude materials older than five years and often contain no evaluations from private owners), an independent investigation can provide a more complete picture of a bidder’s performance.
The court did provide certain caveats. It warned that if an awarding authority decides to investigate one bidder more extensively than another, it must provide justification for doing so. Similarly, it must justify any decision not to allow the bidder to respond to negative information revealed by the investigation. If it fails to provide adequate justification, its decision may be deemed “arbitrary and capricious,” and be overturned by a court.
Contractors on public building construction must be aware that investigations by awarding authorities will not be limited to evaluations by public owners for the prior five years. Negative reviews of any kind can come back to haunt bidders, and bidders must be prepared to counter that negative information.