News

“Good Faith” Efforts to Include MBE Goals in a Bid

In Turlington Valuation Associates, Inc., MSBCA No. 2959 at 1 (May 11, 2016), the Maryland State Board of Contract Appeals (“MSBCA”) denied the appeal of Turlington Valuation Associates, Inc. (“Turlington”) after Turlington failed to make good faith efforts to meet the Minority Business Enterprise  (“MBE”) goals.  In its appeal, Turlington sought a waiver for the MBE participation requirement in an Invitation for Bid (“IFB”) issued by the Department of Health and Mental Hygiene (“DHMH”).  The DHMH Procurement Review Group (“PRG”) set the MBE goal in this IFB at 29%.  Id. at 2.

When DHMH opened the three bid proposals relating to the IFB, the lowest bidder was Turlington, but it requested a waiver from the MBE goal.  The two higher bidders met or exceeded the MBE goal.  Id. at 3.  The PRG considered Turlington’s waiver request, but denied the request and ultimately rejected Turlington’s bid as non-responsive.  Id.  Under Md. Code Ann., State Fin. & Proc. § 14-302(a)(9)(i)1, if a bidder does not meet all or part of a MBE goal, the procurement unit  must determine whether the bidder “took all necessary and reasonable steps to achieve the goals.”  Id. at 6.

Under COMAR, to request a waiver, a bidder must provide:

  1. A detailed statement of the efforts made to contact and negotiate with certified MBEs;
  2. A detailed statement as to the reason a bidder considers each certified MBE subcontract quotation unacceptable;
  3. A list of certified MBEs, including certified MBEs in each MBE classification, found to be unavailable, which shall be accompanied by an MBE unavailability verification form signed by the certified MBE; and,
  4. A statement from an apparent bidder that the certified MBE refused to give a written verification.

Also under COMAR, “a waiver may be granted only upon a reasonable demonstration by the bidder or offeror that certified MBE subcontract participation was unable to be obtained at a reasonable price…and if the agency head or designee determines that the public interest is served by a waiver.”  Id. at 7.  Basically, to show that it has made good faith efforts to meet the MBE participation goal, the bidder must either (1) meet the MBE goal, or (2) document its “Good Faith Efforts” to meet the goals.

In the Waiver Guidance, included in the IFB, “Good Faith Efforts” are defined as a requirement that when requesting a waiver, the bidder must demonstrate that it took all necessary steps to achieve the MBE/DBE Goal(s), which, by their scope, intensity, and appropriateness to the objective, could reasonably be expected to obtain sufficient MBE/DBE participation, even if those steps were not fully successful.  Whether a bidder requesting a waiver made adequate good faith efforts will be determined by considering the quality, quantity, and intensity of the different kinds of efforts that the bidder made.  The efforts employed by the bidder should be those that one could reasonably expect a bidder to take if the bidder were actively and aggressively trying to obtain MBE participation sufficient to meet the MBE contract goal.  Mere pro forma efforts are not good faith efforts to meet the MBE contract requirements.

In its effort to show that it made a “good faith effort” to meet the MBE goal, Turlington contacted five MBEs; one of which declined to made a bid, one of which asked for more information, and three of which submitted bid proposals to Turlington.  Pre-bid, Turlington twice contacted each of the three MBEs who eventually submitted bid proposals.  Post-bid, Turlington contacted each of the three MBEs who eventually submitted a bid and stated that their bids exceeded the Turlington bid amount.  One of the MBEs sent an email to DHMH which stated, in relevant part, “There was not discussion or negotiation involved.  I do not think that this qualifies as an attempt to satisfy the requirement for MBE participation.”  Id.  Thus, despite getting three quotes, Turlington elected not to use any of them and instead decided to self-perform the work by requesting a waiver.  Id. at 11.

Any negotiation between Turlington and the MBEs was to have happened pre-bid.  “Making a good faith effort to meet the participation goal, showing why an agreement could not be reached and negotiated in good faith are conditions precedent to the affirmation that participation could not be achieved.”  Id. at 13.  Moreover, Turlington never engaged in a give and take process on fee prices.  In actuality, Turlington wanted the MBE subcontractors to lower their prices to its price for self-performing the work.

In considering waiver requests, the PRG can make comparisons between quotes for MBE and non-MBE subcontractors.  Turlington, however, did not seek any non-MBE quotes, so no comparison could be made.  Further, the bidders need to make reasonable efforts to solicit MBE participation, such as attending pre-proposal meetings to meet possible MBE subcontractors.  Turlington was the only bidder that did not attend the pre-proposal meeting for this IFB.  “Taken as a whole of all the actions and items to consider, the PRG and the procurement officer did not believe a ‘good faith effort’ was made and that a waiver would not be in the public interest.”  Id.

From a practical standpoint, in the event that a contractor seeks to obtain a waiver of the MBE requirements for a public construction project in Maryland, the contractor should document all good faith efforts it undertook in attempting to secure and MBE contractor.

For further information, contact Michael Siri at 410.583.2400 or at siri@bowie-jensen.com.

icon-location

210 W. Pennsylvania Avenue, Suite 400
Towson, Maryland 21204