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The MSBCA Clarifies the ’72 hour rule’ for Amending MBE Participation Schedules

In Tech Contracting Company, the Maryland State Board of Contract Appeals (“MSBCA”) clarified the scope of the “72 hour rule” that allows a contractor to make changes to its MBE Participation Schedule after bid submission. In this instance, the prevailing bidder, Forrester Construction, listed an MBE contractor that did not have the proper NAISC code. Tech Contracting protested claiming that the prevailing bidder could not meet the 10 percent MBE requirement for the project because one of Forrester’s designated MBEs did not qualify to do the work. Forrester disagreed. One month later, the State concurred with Tech, but allowed Forrester to amend its bid. Forester investigated the situation and four days later amended its MBE participation schedule.

Historically, State agencies had taken an overly restrictive and often harsh approach to any contractor that submitted a bid that contained any defect in its MBE forms. In response to growing criticism that the rejection of bids that contained minor defects to the MBE participation schedules had a detrimental impact on State finances, the Maryland legislature amended section 14-302 of the State Finance & Procurement Article to allow for a 72 hour period in which a bidder or offeror could most notify the State of that a designated MBE is no longer available or is otherwise ineligible.

In this recent opinion, the MSBCA clarified that the 72 hour period begins when the bidder or offeror makes a determination that an MBE is either “unavailable or ineligible,” and not when the State or some other party makes that determination. In this appeal, however, the MSBCA went further and stated that even where the State informs a bidder that an MBE is ineligible, the bidder is not on notice to start the 72 hour period if the bidder disputes the State’s position in good faith. Thus, the three day period begins only when the bidder adopts the State’s position. The MSBCA also underscored that the 72 hour period applies to the time period for notice and not the time period for the bidder or offeror to request to amend the participation schedule.

Finally, the MSBCA offered further interpretation of the statutory language which stated “the bidder or offeror determines that a minority business enterprise identified in the minority business enterprise participation schedule has become or will become unavailable or ineligible.” According to the MSBCA, this allows a bidder to make changes in two instances. The first where an MBE contractor was once available but for some reason is no longer available, and the second where the MBE was never eligible or became ineligible. The MSBCA underscored that the “distinction between an MBE being ‘unavailable’ as compared to ‘ineligible’ is a significant one.” For example, an MBE could have graduated out of the MBE program or just gone out of business and thus becomes “unavailable.” To be ineligible, the MBE may have the wrong NAISC code for a project or have some other limitation such that it does not qualify as a relevant MBE for a project. Thus, in this instance Forrester was allowed to amend its MBE participation schedule.

On the basis of these clarifications to the 72 hour rule, the MSBCA has set the groundwork to allow a contractor whose bid includes an ineligible MBE contractor to make a change within 72 hours after the time in which that contractor, for the first time, in good faith believes that the MBE contractor is not eligible. The MBE need not have ever been eligible to trigger this rule. Likewise, contractor whose bid includes and MBE contractor that has become unavailable.

For further information on procurement issues or bid protests, please contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-jensen.com.

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