• January 11, 2012

    Division of Purchase & Property Issues New Contracting Rules

    Written By: Megan M. Schwartz

    The Department of the Treasury, Division of Purchase and Property (the “Division”) has issued new and revised rules regarding its responsibilities for conducting the review of all State agency and authority contracts and purchases.

    This Client Alert will highlight the more noteworthy proposed amendments and new rules and their potential impact on bidders. Vendors and bidders are also encouraged to review the entirety of the Division’s rule proposal which can be found here, and to make comments on same. Hill Wallack LLP's Government Contracting Practice Group is available for assistance in developing and submitting comments. Comments are due to the Division by Feb. 17, 2012.

    Among the Division’s significant new rules and amendments are provisions that:

      • Allow certain exemptions from the Open Public Records Act (“OPRA”)
      • Require the Director to make an assessment from each contractor in the amount of one quarter of one percent of the value of all transactions on contracts as defined in the request for proposals (“RFP”)
      • Provide an additional exception to the State’s advertised procurement requirements authorizing individual State agencies to conduct their own procurements
      • Provide a more detailed description of the Division’s cooperative purchasing requirements
      • Revise the protest procedures both for specification and award challenges
      • Provide greater discretion for using agencies to file complaints against vendors
      • Establish a new subchapter pertaining to the Division’s responsibilities to conduct the political contribution compliance review process as part of the State’s contracting program

    Open Public Records Act Exceptions

    The Division proposes amendments to clarify the Division’s obligations with regard to OPRA, including certain exceptions to the general rule that all information bidders submit will become public information after bid opening. The amendments ensure that proposals submitted in response to an RFP with a negotiation component are not publicly accessible until the contract award is made.

    In addition, the amendments set forth procedures for bidders to identify data or materials that are asserted to be exempt from disclosure. However, bidders may not assert that their entire proposals or prices contained in the proposal are exempt from disclosure pursuant to OPRA, the common law or the U.S. Copyright Act.

    Under the proposed rules, the Director has the final authority to determine which materials are exempt from disclosure. For those bidders with extensive proprietary information in their proposals, the Division’s recognition of bidders’ ability to identify data or materials as exempt is a clear benefit. Hill Wallack LLP's Government Contracting Practice Group is well-versed in the applicable legal standards for designating proposal materials as exempt from OPRA.

    Fee Assessment

    A new rule requires the Director to make an assessment from each contractor in the amount of one quarter of one percent of the value of all transactions on contracts as defined in the RFP. According to the Division’s new rule, the intention of this fee assessment is to maintain the efficiency of the State’s procurement system at a level common to industry standards.

    The term “transactions” is undefined in the proposed rules. As such, the extent to which this assessment applies is unclear. If this proposed rule is enacted, vendors are encouraged to carefully review specifications relating to this assessment. Hill Wallack LLP's Government Contracting Practice Group is extremely skilled in specification review and interpretation.

    Exception for State Agencies to Conduct Their Own Procurements

    The Division proposed a new rule which permits the Director to authorize a State agency to undertake its own advertised procurement process not exceeding $250,000 in cost. This new exception to the Division’s formal, publicly advertised, competitive procurement process will be conducted with the Division’s guidance and oversight and only when the procurement is limited to the agency’s needs and certain conditions are met.

    Cooperative Purchasing Requirements

    This rule proposal includes a more detailed description of the Division’s program for establishing cooperating purchasing and cooperative procurement agreements with other states or subdivisions thereof or with political subdivisions of the State or with nationally recognized contracting entities.

    The new rules provide that the Director may enter into a cooperative purchasing agreement prior to, during or after an advertised competitive procurement for the purchase of goods or services if the Director deems the agreement to be the “most cost effective contractual solution.”

    Under the proposed new rule, cost effectiveness is determined by the following factors: (1) lower than current State contract pricing that will afford material cost savings; (2) lower than pricing for comparable goods or services of other State or public entity contracts; (3) expanded product or service availability; (4) the ability to avoid the cost and time of a State procurement; (5) a record of satisfactory vendor performance; (6) lower minimum purchase requirements; (7) comparatively better quality of goods or services; and (8) administrative cost factors required to participate in the cooperative agreement.

    Importantly, prior to entering into a cooperative purchasing agreement, the Director must: (1) review and approve the specifications and proposed terms and conditions of the contract; (2) comply with legal notice provisions; and (3) require the contractor or awardee to execute an addendum containing the State contracting terms and conditions and any other terms making the agreement more favorable to the State.

    The requirement for the Division to provide prior notice of cooperative purchasing agreements stems from an Appellate Division decision wherein Hill Wallack LLP’s Government Contracting Practice Group successfully argued for same. Vendors with cooperative purchasing issues are encouraged to contact Hill Wallack LLP’s government contracting attorneys for their demonstrated expertise in this ever-changing area of law.

    Specification and Award Challenges

    The new proposed rules significantly change the Division’s procedures for specification and award challenges. Hill Wallack LLP’s Government Procurement Practice Group has extensive experience drafting specification and award challenges.

    The current rule requires specification protests to be submitted no less than 72 hours before the scheduled bid opening. The proposed new rules permit written specifications challenges to be submitted only after the Division has formally responded to questions posed during the RFP-established question and answer period. Further, specification challenges must be filed no fewer than seven (7) business days prior to the deadline for proposal submission.

    It appears the Division’s intention is to encourage bidders to utilize the Division’s question and answer period to present their questions and/or issues concerning an RFP’s specifications rather than by filing a formal protest of specifications. Bidders are cautioned to preserve their rights through the filing of a formal protest of specifications should the Division’s response to their questions and/or issues not be satisfactory.

    The Division’s rule proposal now requires the Director to issue notice of intent to award to all bidders. The current rule requires a bidder to protest an award within ten (10) business days following the vendor’s receipt of written notification that its bid has not been accepted or of notice of the award decision.

    The proposed new rules require a bidder seeking to challenge the rejection of its proposal or the scheduled contract award to file a protest within ten (10) business days of the bidder’s receipt of written notification of its rejection or notice of intent to award or prior to the deadline specified in the Division’s notice of intent to award communication to the bidder, whichever is earlier. Bidders must be attentive to any deadlines contained in the Division’s notice of intent to award in order to comply with the protest filing time frame.

    Using Agency Complaint Against Contractors

    The Division has amended its complaint procedure to include a reservation of the State’s rights and/or remedies available at law or in equity should a using agency fail to use the complaint process for a contractor’s alleged failure to comply with contractual provisions.

    Also, the Division proposes to amend the subject matter of complaints to provide using agencies greater discretion with respect to filing same. Specifically, using agencies are required to promptly initiate and file a formal complaint for a contractor’s failure to comply with the provisions, terms, and conditions of a State contract.

    Further, a new provision provides that a pending complaint or an initial Contract Compliance & Audit Unit determination does not prevent the State from exercising any other right or seeking any remedy available at law or in equity. An amendment to the complaint procedure is also proposed to indicate the Appellate Division of the New Jersey Superior Court is the proper venue for appeals; the current rule incorrectly provided for appeals to the Law Division. Hill Wallack LLP’s government contracting attorneys have represented numerous vendors in response to using agency complaints.

    “Pay-to-Play” Compliance

    The Division proposes a new subchapter pertaining to the Division’s responsibilities to conduct the political contribution compliance review process as part of the State’s program to ensure that no purchases or contracts in excess of $17,500.00 are made or awarded by State agencies and authorities to business entities that have contributed in excess of $300.00 to certain political entities.

    Pursuant to this new subchapter, any business that is requested to do so by a State agency or authority must submit completed certification and disclosure forms. The Division Review Unit will review the forms for compliance to the requirements of the governing statute and executive orders. If, or when, the provided documentation is sufficient, the Review Unit shall issue a two-year certification to the business entity. Compliance is required during the two-year certification. A business entity must re-submit a new set of forms if there are any changes in political contributions or the entity’s ownership structure.

    If the Review Unit determines that the business entity has made a disqualifying contribution or that a conflict of interest exists, the Review Unit will advise the State agency or authority in writing. The State agency or authority must inform the business entity of the ineligibility determination.

    If the business entity believes the ineligibility determination was made in error, it may request reconsideration by the Director, which must be made in writing within ten (10) business days of the receipt of such notice or prior to deadline specified in the notice, whichever is earlier. The Director shall issue a written decision on the matter under reconsideration.

    A business entity shall have ten (10) business days following receipt of the Director’s written decision to appeal the decision to the State Treasurer. The Treasurer shall determine whether it is a contested matter and if so, shall refer the matter to the Office of Administrative Law. If the State Treasurer determines the matter is not contested, the Treasurer shall issue a written final determination, which is appealable to the Appellate Division of the New Jersey Superior Court.

    Additional Notable Amendments & New Rules

    Vendors should also be aware that the proposed rules broaden the application of Federal supply schedules into State contracts. It appears the Division desires to increase the State’s use of Federal procurement program contractors. The Division’s proposed amendments expand application beyond the initial statutory restriction to reprographic equipment. As such, vendors who are part of Federal procurement programs are advised to pay close attention to contracting notices and to insure their compliance with Treasury Circular 11-03-DPP, Purchases from Federal Supply Schedules or Schedules of Other Federal Procurement Programs. Hill Wallack LLP’s government contracting attorneys are ready and able to assist Federal procurement programs contractors with such compliance.

    The rules also indicate that the Division no longer uses the hardcopy mailing list process. Instead, the new rules describe the Division’s exclusive use of its e-RFP Notification Service, which is an e-mail-based notification service available to and controlled by each registering vendor. Bidders are encouraged to register for this service in order to receive information regarding current bidding opportunities.

    In addition, the rules were amended to allow for use of other forms of bid and performance security as set forth in specific RFPs. Bidders will be able to submit the forms of bid and performance security that are defined therein. Potential bidders are advised to carefully review specifications pertaining to bid and performance security as the traditional requirements of certified or cashier’s checks, bonds and/or irrevocable letters of credit may be revised to include other acceptable forms of security.

    About Hill Wallack LLP’s Government Contracting Law Practice Group

    Hill Wallack LLP’s Government Contracting Practice Group has a long history of providing cutting edge advice to vendors, as well as governmental contracting units, involved in government contracting, on a broad range of legal matters, including rules comments, specification review and challenges and bid award protests. Our counsel on governmental processes keeps private sector vendors and public entities ahead of the curve in these ever-changing areas of law. Any questions about these proposed rules, please contact Patrick D. Kennedy, Esq. or Megan McGeehin Schwartz, Esq.

    For more information, contact one of the attorneys who work in this area:

    Alert Author

    Megan M. Schwartz, Esq.

    Administrative Law & Government Contracts

    Patrick D. Kennedy, Esq.
    Maeve E. Cannon, Esq.
    Jessica L. Perl, Esq.

    Municipal & School Law

    Rocky L. Peterson, Esq.

    Regulatory & Government Affairs

    Paul P. Josephson, Esq.

    This article provides information of general interest and is not intended, and should not be used, as a substitute for consultation with legal counsel. Any questions regarding the specific issues raised in this article should be directed to the authors or to your contacts at Hill Wallack LLP.