Requests for Proposals and Bid Protests on State of California Services Contracts and Purchasing Contracts Under California Law, Public Contract Code Sec.13044 & 10345

Various California public bidding laws - and many parallel local ordinances - allow Government Agencies in certain limited circumstances to purchase services and goods under Requests for Proposals, Competitive Negotiations, Design-Build, Best Value Solicitations and other means, as alternatives to the traditional competitive bidding or Invitations for Bids (IFB), in certain limited circumstances.

One of these laws is California Public Contract Code § 10344, which authorizes use of one of two types of Requests for Proposals for services contracts.

Under 10344 (b) proposers must meet certain standards in their proposals, which also include a sealed cost bid, and the contract is then awarded to the proposal meeting the required standards and having the lowest costs.

This is often referred to as a Primary Request for Proposal (PRFP).

In the second RFP method in 10344( c) the agency evaluates the bids based on a weighted scoring or grading system, a substantial portion of which is based on the costs for the services, and the balance of the score (typically less than 50% of the score) is based on an evaluation of the merits of the services being proposed.

This is referred to as a Secondary Request for Proposal (SRFP)

Examples of where such proposals might be used are proposals for research projects, or for the design of some highly unique or innovative services.

According to the State Contracting Manual, a Secondary Request for Proposal under Publiic Contract Code § 10344( c) is only appropriate or justifiable when “creative or innovative approaches are needed”¹ (Emphasis added), or where

“Performance requires unusual, innovative or creative techniques, methods and approaches [and where] the quality of expertise and approaches, methods and innovation used may vary significantly from one proposer to another”². (Emphasis added)

and where the services to be provided are

“complex services calling for technical and/or professional skills and expertise. The proposer uses discretion in applying various approaches or methods”³ (Emphasis added),.

or where the

“services are complex, uncommon or unique” and the “quality of expertise and approaches, methods and innovation used may differ from one proposer to another” (Emphasis added)

Secondary Requests for Proposals “Should be limited to those instances in which State agencies”⁴ are:

“seeking a unique solution to a problem or situation that cannot necessarily be resolved by the lowest bidder (I.e., when [unique] methods, approaches, and procedures used in performing the work are of primary importance” (Emphasis added)⁵

In Secondary type of Request for Proposals, only the “goals and objectives are stated [and the] proposer offers detailed work plans, approaches, methods” (Emphasis added) etc.⁶

“An RFP seeks an answer to the following:

“Here is what we wish to accomplish... How would you accomplish the job for us and for how much”(Emphasis added)⁷

The DGS contracting regulations also say that RFPs of any type “should not be used”⁸:

“when the service or equipment is standard, routine, or common, or where there is a standard associated with the service or equipment to be hired”⁹.

Where the purpose is to obtain “common, or routine services that require personal or mechanical skills [but] little discretion is used in performing the work”, competitive bids via an Invitation for Bid should be used instead of either type of Requests for Proposals

However, where:

“the statement of work (SOW) is clearly stated [and] bidders are generally told what, how, when and where work and services are to be done”,

a Invitation for Bid (IFB) should be used, instead of either type of Request for Proposals.¹⁰ This is entirely consistent with the Legislative History from the original adoption of this statute in the General Assembly - Stats 1983 ch 1231 § 4.¹¹

“a. For bid responses to a prescribed service procedure, the contract need not be awarded low bid. The agency, however, must justify any award to other than the lowest bidder.

b. For responses to a request for proposal (RFP), where the bidders both design a solution to an agency's problem and submit a bid to perform the service, the award shall be made to the lowest bid on a response that meets the agency's needs. The determination of each proposal’s responsiveness must be made before the bids (prices) are opened.” (Emphasis added)

Thus, Requests for Proposals are not designed to be commonly used, absent substantial reasons.

The documents submitted to the Legislature in support of ch 1231 § 4 also indicate that it:

“Requires that competitive bids be secured, unless specified conditions apply.”(Emphasis added)

One policy reason why such Requests for Proposals, especially Secondary Requests for Proposals, should be used rarely and only where truly unusual services or much creativity are required is that such proposals are necessarily evaluated in part subjectively on criteria other than price, and that process - which competitive bidding was designed to eliminate - is subject to abuse, corruption, cronyism, favoritism. fraud etc

Thus the use of a Secondary Request for Proposal for these very standardized and highly regulated and controlled services was in violation of the DGS State Contracting Manual, and DGS was under a duty to disapprove the award of this Contract under Public Contract Code § 10295 & 10297.

Under the Public Contract Code the Department had the power and mandatory non- discretionary duty to decide this issue:

“The provisions of Section 10295 [regarding DGS approval of all contracts] shall apply both to contracts awarded through competitive bidding and those not subject to competitive bidding. The department shall deny its approval of a contract awarded through competitive bidding if it finds that the contract does not meet the specifications or other conditions of the bidding process, or if any applicable statutes or regulations regarding competitive bidding have been violated. With regard to any contract not awarded through competitive bidding, the department shall ascertain whether the contract is subject to competitive bidding requirements, and if it finds that is the case, the department shall deny its approval...” Pub Contract Code § 10297 (All emphasis added)

Instead, a straight competitive bid/IFB or Primary Request for Proposal MUST be used instead of an Secondary Request for Proposal, both of which are appropriate for more standardized services, and both of which are less susceptible of abuse.

Consistent with all the above concerns, section 10297 of the Public Contract Code in fact requires the Department of General Services to disapprove of any services contract or purchasing contract which violates bidding laws or regulations such as the State Contracting Manual, or which was not solicited through competitive bidding (IFB), where it was possible to have competitively bid that contract.

Public Contract Code sec. 10421 provides that any person may bring a lawsuit on behalf of the State to challenge any State services contract or purchasing contract entered into in violation of the above and other statutes, and that any such contract is void.

If the lawsuit is successful, the Plaintiff may recover attorneys fees and costs.

Apparently Bid Protests under Public Contract Code sec. 10345 may not be brought on these grounds, but until the law on this issue becomes more settled it may be safer to also include these statutory and State Contracting Manual issues in a Bid Protest anyway, to be conservative and to avoid any argument that these grounds were waived by failing to include them in a Bid Protest.

In either type of an RFP, a competing bidder or proposer may file a Protest of the award to another bidder or proposer on the grounds that the procedures were not properly followed or the evaluations were not fairly done, and related grounds.

Public Contract Code sec. 10345 thus provides for the filing of Bid Protests for services contracts or purchase contracts awarded by an Invitation for Bid/straight competitive bid (IFB), or via a Request for Proposal under section 10344.

Bid Protests under this section must be filed with the Department of General Services and the State agency or Department soliciting the Bid/RFP within five (5) days of the date Notice of the Proposed Award has been served or posted on the State’s internet site.

Within five (5) days of filing a bid protest with the State agency/department AND the Department of General Services, the protestor must also file with the same two agencies a “Detailed Statement of Protest” “specifying the grounds for the protest”.

It is best to seek the assistance of an experienced government contracts attorney in preparing this “Detailed Statement” as many of the issues yo may want to raise will be legal ones, and your Bid Protest will likely be reviewed by lawyers for the State.

In the case of Request for Proposals under Public Contract Code sec. 10344 protests are limited to the following grounds:

1. The state agency failed to follow the procedures specified in either subdivision (b) or (c) of Section 10344.
2. The state agency failed to apply correctly the standards for reviewing the format requirements or evaluating the proposals as specified in the request for proposal.
3. The state agency used the evaluation and selection procedure in subdivision (b) of Section 10344, but is proposing to award the contract to a bidder other than the lowest responsible bidder.
4. The state agency used the evaluation and selection procedure in subdivision (c) of Section 10344, but failed to follow the methods for evaluating and scoring the proposals specified in the request for proposal.
5. The state agency used the evaluation and selection procedure in subdivision (c) of Section 10344, but is proposing to award the contract to a bidder other than the bidder given the highest score by the state agency evaluation committee.

While section 10345 (c) required the Department of General Services to “establish written procedures for deciding protests under this section”, in 1985 it instead just adopted a very general or generic bid protest regulation which dumps the whole process into the lap of a “hearing officer” who them is expected to somehow figure out how the handle such protest, at a hearing or otherwise. 2 California Code of Regulations § 1195 et seq

Thus it appears that the Department of General Services (DGS) abrogated its obligations to adopt procedures specifically applicable to “this section”

Some sort of a hearing likely should have been required for Bid Protests under “this section”, or else neither the hearing officer nor another bidder could ever possibly hope to determine whether “(B) The state agency failed to apply correctly the standards for reviewing the format requirements or evaluating the proposals as specified in the request for proposal.” or whether or not “(D) The state agency used the evaluation and selection procedure in subdivision (c) of Section 10344, but failed to follow the methods for evaluating and scoring the proposals specified in the request for proposal” without testimony from agency employees and/or a review of the internal documents, proceedings and evaluation process of the agency itself.

The 1985 DGS regulations fail to address any of these issues.

Certainly neither a competing bidder, a hearing office nor a Court should be artificially limited to just an agency’s self-serving assertions that it followed the stated methods or applied the required standards.

If that were the case, there could never be any effective bid protest on those grounds, and there would never be any way to determine whether the agency followed or applied the required methods or standards in awarding a contract, or whether they secretly really made their decision on the basis of “favoritism, fraud [or] corruption” under Public Contract Code § 100(d).

Additionally, because a decision under Public Contract Code § 10344 & 10345( c) effectively involves the selection of the bidder who is most “responsible”¹² (See Pub. Cont Code § 10345( c)( C)) among the bidders submitting proposals, a protesting bidder likely is required to have a Due Process hearing under the Constitution and the Administrative Procedures Act before a Department makes its “decision” on the Bid Protest.

“[I]f a contract is awarded to one other than the lowest monetary bidder, the ineluctable implication is that the latter is not responsible.” (Emphasis added)

Inglewood-Los Angeles County Civic Center Authority, supra, 7 Cal. 3d at 867.

“An agency [which] has discretion to determine whether a low bidder is ‘responsible,’ that is, whether the bidder has the fitness, quality, and capacity to perform the proposed work satisfactorily. (City of Inglewood-L.A. County Civic Center Auth. v. Superior Court (1972) 7 Cal.3d 861, 867 [103 Cal. Rptr. 689, 500 P.2d 601].) In making this determination, however, the agency is required to afford a significant level of due process to the bidder...” (Emphasis added)

D.H. Williams Construction, Inc. v. Clovis Unified School Dist. (2007) 146 Cal. App. 4th 757, 763, Great West Contractors v. Irvine School District (2010) 187 Cal.App.4th 1425, 1428-1429, 1449-1458.

That “significant level of due process” presumably includes an evidentiary hearing.

Furthermore, it may be that the administrative adjudication provisions of the 1995 Administrative Procedure Act revisions and expansion (Gov. Code § 11400 et seq) have superceded or will affect the Bid Protest hearing procedures adopted by DGS for Bid Protests under section 10345.

Many of these rights and Bid Protest procedures and issues are not yet fully defined or clear yet, as there has been no case law or precedents published on these issues to date, which again emphasizes the need for counsel and representation from an experienced government contract lawyer in these proposals and bid protests.

The law on these Requests for Proposals and Bid Protests can be expected to develop over the years as these procedures are used more frequently.

Presently, in the absence of any clear precedents from the Court of Appeal, trial courts that are unfamiliar with these statutes and issues will likely defer unnecessarily to the judgment of the Department or agency.

But these types of Requests for Proposals are certainly subject to abuse by bidders and Government agencies, as they are rife with opportunities for bid rigging, collusion, favoritism, cronyism etc. They thus should be used only rarely and scrutinized closely by the Courts, not deferentially, as some Courts have done in the past.

As one Appellate Court wisely held:

“The purpose of... public bidding is to eliminate favoritism, fraud and corruption; avoid misuse of public funds; and stimulate advantageous market place competition. (See legis. intent declared in Pub. Contract Code, § 10300;... Because of the potential for abuse arising from deviations from strict adherence to standards which promote these public benefits, the letting of public contracts universally receives close judicial scrutiny and contracts awarded without strict compliance with bidding requirements will be set aside. This preventative approach is applied even where it is certain there was in fact no corruption or adverse effect upon the bidding process, and the deviations would save the entity money... The importance of maintaining integrity in government and the ease with which policy goals underlying the requirement for open competitive bidding may be surreptitiously undercut, mandate strict compliance with bidding requirements... ”(Emphasis added).

Konica Business Machs. U. S. A. v. Regents of Univ. of Cal. (1988) 206 Cal. App. 3d 449, 456-457

• ¹ State Contracting Manual, Section 5.06, Table 5.1.
• ² State Contracting Manual, section 5.17, Table 5.3.
• ³ State Contracting Manual, Section 5.07, Table 5.2.
• ⁴ “Should” means this directive “need (sic) to be followed unless the agency has a good business reason for variance. State Contracting Manual Section 1.03(A), Table 1.1
• ⁵ State Contracting Manual, Section 5.25(A)
• ⁶ State Contracting Manual, Section 5.06, Table 5.1
• ⁷ State Contracting Manual, Section 5.15.B
• ⁸ “Should” means this directive “need (sic) to be followed unless the agency has a good business reason for variance. State Contracting Manual Section 1.03(A), Table 1.1
• ⁹ State Contracting Manual, Section 5.15(C).
• ¹⁰ State Contracting Manual, Section 5.07, Table 5.2, p. 57.
• ¹¹ Originally a part of the Government Code, before adoption of the Public Contract Code.
• ¹² The word "responsible" while that term includes the attribute of trustworthiness, it also has reference to the quality, fitness and capacity of the low bidder to satisfactorily perform the proposed work.” Inglewood-Los Angeles County Civic Center Authority v. Superior Court of Los Angeles County (1972) 7 Cal. 3d 861, 867, fn. 5. (Emphasis added) See also, Publiic Contract Code §1103