From time to time, the Washington State Auditor’s Office (“SAO”) has issued findings or management letters for how ports and other agencies have procured services. Recently, SAO has taken an interest in professional services performed by engineers, land surveyors, architects, and landscape architects (“A&E services”)[1], specifically in the context of multi-year on-call or task-order contracts. This is an important issue for SAO because it views procurement of A&E services to be an area at high risk for fraud, loss, abuse, or noncompliance. The issue regarding multi-year on-call contracts was prompted last year after SAO sent management letters to municipal governments, including a port, calling into question the use of multi-year contracts for on-call A&E services. This came as a surprise to many because many ports and other municipal governments have been using these types of contracts for A&E services for many years without issue.
After learning about this issue, WPPA worked with its contacts at SAO to gain some clarity and to avoid SAO adopting a position against multi-year on-call contracts. After some productive discussions and WPPA sharing a legal memorandum addressing this topic, SAO clarified that it is not taking the position that multi-year on-call (or task-order) contracts are prohibited. SAO also informed WPPA that it would be providing updated guidance to its auditors on this issue to hopefully avoid future issues. This month’s column discusses what we learned from the discussions with SAO and provides some practical recommendations for your port to consider when entering into A&E services contracts.
The rules for procuring A&E services are different than those for public works and personal services.
Overall Framework: Ports must: (a) advertise the need for A&E services (either generally or by specific project); (b) encourage firms to submit annually a statement of qualifications and performance data; (c) evaluate current submissions on file with the agency, together with those submitted for a specific project; and (d) conduct discussions with one or more firms regarding concepts and alternative methods for furnishing the required services. Following these steps, the port must select, based on established criteria, the most qualified firm for the project.[2] According to the State Attorney General’s Office, a port may not consider price or cost in determining which firm is most highly qualified, but instead, it must select a firm and negotiate toward a “fair and reasonable” price for the services.[3] If the port is unable to negotiate a satisfactory contract (including price), the port must then select other firms in accordance with the above-described process and continue until agreement is reached or the process is terminated.[4] Price matters, but it should only be considered later in the process.
Can a port enter into a multi-year contract with an engineer? Yes, because the statute does not prohibit multi-year contracts for specific projects (RCW 39.80.030(1)) or for contracts for categories or types of service (RCW 39.80.030(2)). On-call A&E services agreements are typically “as-needed” agreements, meaning the port can choose to issue task orders (or not) during the term of the agreement. However, it is a best practice for on-call agreements to be subject to termination by the port for convenience and not be exclusive (meaning the port can choose to hire another firm even during the term of the on-call agreement). Among other benefits, this flexibility will assist the port in showing compliance with the requirement to encourage firms to submit a statement of qualifications annually and to evaluate those submissions in a meaningful way: the port can show that it has retained the options to enter into separate on-call agreements with other firms and to maintain (or not) an existing on-call agreement. In other words, while SAO is not taking the position that entering into on-call A&E services agreements that span multiple years is prohibited, SAO wants to see that the port has a procedure whereby the port encourages and reviews annual submissions while maintaining a multi-year agreement. This could be accomplished, for example, by a port soliciting for A&E contractors to submit their qualifications through the port’s website and then reviewing those submissions as they come in, or at least on an annual basis.
What about a roster? Is that an option? Yes. There is no express reference to A&E services consultant rosters in RCW 39.80 (as compared to small works rosters). Yet, a roster process is a recognized means of “announcing generally to the public [the port’s] projected requirements for any category or type of professional services” under the statute.[5] However, to ensure audit compliance, the port must authorize and describe the manner of using an A&E services consultant roster process in its policies and procedures. Conservatively, the roster should be updated annually to meet the requirement to encourage firms to make annual submissions. When establishing a roster, the port may: (i) establish its own roster; (ii) share a roster with other agencies using an interlocal agreement; or (iii) designate a roster service provider such as Municipal Research and Services Center.
When the time period for services specified in the RFP and contract expires, does the port need to undergo a new procurement process? Potentially, yes. If a port issues a request for services needed for two (2) years and enters into a two (2)-year on-call agreement, but later wishes to extend its contractual relationship with the firm for additional services, the conservative approach would be to advertise the need for services before extending the agreement to be certain that all interested firms have the opportunity to compete. On the other hand, it may not make sense to engage a different firm in the middle of a large, long-term project. In such a case, the original solicitation and contract should contemplate a multi-year contract.
Can a port contract directly with another port or other public agency for A&E services without first complying with the procurement procedures of RCW 39.80? Not according to the State Attorney General’s office. In 2011, the State Attorney General concluded that the general authority granted to agencies to enter into interlocal agreements does not excuse compliance with the procedures established for the procurement of A&E services.
Can a port justify the selection of a firm based on sole source principles? No. Generally, ports may rely on exemptions to competitive bidding requirements under RCW 39.04.280, which includes a sole source purchasing “limited to a single source of supply.” Given this language, A&E services are not covered by this statute. Also, the sole source contracting method identified in RCW 53.19 for ports applies only to “personal services,” not to A&E services.
Are there additional considerations if a project is federally funded? Yes, this column focuses on Washington State requirements for procuring A&E services. Additional or different requirements apply to federally funded projects. SAO made a specific point that there is more scrutiny for any project using federal funds, and that for those projects, the most restrictive rules or requirements will apply.
The takeaways are as follows:
- Multi-year, on-call contracts are allowed. SAO wants to see that these contracts were “thoughtfully drafted.” It is recommended that your port adopt a form A&E services contract to utilize consistently. Some provisions to consider for the form contract include:
- Include a contract provision that allows the port to request at least annual confirmation that the firm remains qualified, and permits the port to terminate the contract if the A&E services firm loses its qualification during the term of the agreement.
- Carefully consider the duration of services when issuing an RFP/RFQ and specifying the term of the contract. Ensure that your on-call A&E services contracts can be terminated for convenience.
- Avoid exclusivity provisions, so the port is free to retain other qualified firms during the term of the multi-year A&E services contract.
- It is not enough to solicit recommendations from other ports when procuring A&E services. Similarly, sole-source contracting is not an option. Selecting a firm without using a process on the rationale that “we surveyed a number of other ports and they all recommended this firm,” or “this is the only firm that provides this unique service,” or “this is the only firm that knows the needs of our port,” will not pass muster. It very well may be that one firm is uniquely qualified, in which case that firm will rise to the top when applying the established process outlined above.
- Show your work and retain documents. SAO will review the port’s records to determine the whether established process was followed. A decision matrix used and retained by the port can show that it objectively scored potential firms based on pre-established criteria.
- Review the port’s policies to ensure inclusion of statutory elements, including those outlined above. Also, the procurement policy should address the requirement for a plan to ensure that minority and women-owned firms and veteran-owned firms are provided maximum practicable opportunity to compete. The State Office of Minority and Women’s Business Enterprises allows agencies to post advertisements for A&E services needs on its website.
- If a consultant roster will be used, the authority to do so should be adopted by resolution, and the procurement policy must describe when and how a roster process will be used.
- Establish a policy of encouraging A&E services firms to submit a statement of qualifications and performance data annually to the port. This may be accomplished using a roster process or perhaps posting a process on the port’s website. Submissions on file must be evaluated along with submissions targeting a specific port project during each selection process. Review these annual submissions when considering an extension of the term of a contract.
If you have questions about these processes, work with your port’s procurement team and legal counsel. If you have a question for Knowing the Waters, please e-mail me at tschermetzler@csdlaw.com
[1] RCW 39.80.020(5).
[2] RCW 39.80.030-040.
[3] Wash. AGO 1988 NO. 4 (1988).
[4] RCW 39.80.050.
[5] RCW 39.80.030(2).
