H. R. 1942
IN THE HOUSE OF REPRESENTATIVES
May 9, 2013
Mrs. Carolyn B. Maloney of New York introduced the following bill; which was referred to the Committee on Oversight and Government Reform
To assure quality and best value with respect to Federal construction projects by prohibiting the practice known as bid shopping.
This Act may be cited as the
Construction Quality Assurance Act of
Congress finds the following:
Federal construction project sealed bid contractor selection procedure is a valuable project acquisition method that should be preserved and strengthened for projects of appropriate scope.
Federal procurement data trends indicate that agencies increasingly are relying on other negotiated contractor selection procedures, rather than price-only selection procedures.
Requirements for Federal agencies to use major subcontractor bid listing on price-only prime contractor selection procedures would restore the balance in use of low-bid and competitive negotiations, which has proven results in other public procurement systems.
Bid shopping occurs when the successful prime contract low bidder, after project award, uses the successful subcontract low bids as the beginning point for a post-award auction to the same or other subcontractors to agree to perform the subcontract work at an even lower price, with the savings accruing only to the benefit of the low-bid prime contractor, not the agency program, the project, or the taxpayer.
Bid peddling occurs when other subcontractors approach the successful prime contractor bidder after award of the prime contract and offer to perform the subcontract work at a lower price than submitted by the subcontractor whose sub-bid price was relied on by the successful prime contractor, again with the ostensible savings accruing to the prime contract low bidder only, not the agency program, the project, or the taxpayers.
Listing of major subcontract bids in the prime contractor’s sealed bid by agencies will effectively stem the detrimental and inequitable practices of bid shopping and bid peddling on direct Federal construction contracts that are detrimental to the taxpayers’ interest in Government procurement transparency, sound public contract administration, and successful construction project completion.
Agencies will receive better project performance, by restoring integrity to the low-bid selection system for both prime contractors and major subcontractors, as abusive selection procedures often lead to greater project disputes, claims, changes, product and material substitutions, and in some cases even contractor defaults—again, all to the detriment of the agency program, the project, and the taxpayers generally.
Restoring equitable safeguards in the low-bid system will assure that agency practice will conform to the highest standards adhered to by industry professionals and contractor associations, and will reflect best practices followed by a great many other public procurement systems nationally and internationally.
In this Act:
The term contract means any contract with the Federal Government, exceeding $1,000,000 in amount, for the construction, alteration, or repair of any public building or public work of the United States.
The term contractor means an individual or entity that has been awarded or is seeking to be awarded a construction contract by the Federal Government.
The term subcontractor means an individual or entity that subcontracts with a contractor in an amount in excess of $100,000 for work on a contract.
Requirements regarding subcontractors for Federal contractors on construction projects
Requirement To List Subcontractors
Each solicitation by an executive agency for the procurement of construction in an amount in excess of $1,000,000 shall require each bidder to submit as part of its bid the name, location of the place of business, and nature of the work of each subcontractor with whom the bidder, if awarded the contract, will subcontract for work in an amount in excess of $100,000 on the contract.
Requirements for specific categories
Except as provided in subparagraphs (B) and (C), the bidder shall list only one subcontractor for each category of work as defined by the bidder in its bid or proposal.
A bidder may list multiple subcontractors for a category of work if each such subcontractor is listed to perform a discrete portion of the work within a category.
A bidder may list itself for any portion of work under the contract, which shall be deemed a representation by the bidder that it is fully qualified to perform that portion of the work itself and that the bidder will perform that portion itself.
Result of failure to list subcontractors
An executive agency shall consider any bidder that fails to list subcontractors in accordance with this Act and the regulations promulgated pursuant to section 7 of this Act to be non-responsive and bids by such bidders shall not be considered.
Procedures for Substitution of a Listed Subcontractor
Consent and good cause required
No contractor shall substitute a subcontractor in place of the subcontractor listed in the original bid or proposal, except with the consent of the contracting officer for good cause.
Examples of good cause
Good cause under paragraph (1) shall include the following:
Failure of the subcontractor to execute a written contract after a reasonable period if such written contract, based upon the terms, conditions, plans, and specifications of the contract and the terms of the subcontractor’s bid or proposal, is presented to the subcontractor by the contractor.
Bankruptcy of the subcontractor.
The death or physical disability of the subcontractor, if the subcontractor is an individual.
Dissolution of the subcontractor, if the subcontractor is a corporation or partnership.
Failure of a subcontractor to meet the surety bond requirements specified by the bidder as a condition of the subcontractor to perform on the contract, if awarded to the bidder.
The subcontractor is ineligible to perform on the subcontract because the subcontractor is suspended, debarred, or otherwise ineligible to perform.
A series of failures by the subcontractor to perform in accordance with the specification, terms, and conditions of its subcontract resulting in the withholding of amounts requested by the subcontractor in accordance with section 3905 of title 31, United States Code, and the regulations implementing such section.
Failure of the subcontractor to comply with a requirement of law applicable to the subcontractor.
Failure or refusal of the subcontractor to perform the subcontract.
Requests for substitution
A request of a contractor for a substitution of a listed subcontractor shall be submitted in writing to the contracting officer and shall include the reasons for the request. The contractor shall provide a copy of its request for substitution to the listed subcontractor by any means that provides written third-party verification of delivery to the last known address of the subcontractor. A subcontractor who has been so notified shall have five working days within which to submit written objections to the substitution to the contracting officer. Failure to file such written objections shall constitute the consent of the listed subcontractor to the substitution.
Limitation on Assignment, Transfer, or Substitution
Limitation on assignment or transfer
No contractor shall permit any subcontract to be voluntarily assigned or transferred or to be performed by any entity other than the subcontractor listed in the bid or proposal without the consent of the contracting officer. Consent of the contracting officer to a contractor for a substitution shall—
be promptly made in writing; and
be included in the contract file.
Limitation on substitution
No contractor that listed itself for a portion of the work under the contract shall subcontract any portion of the work for which it listed itself, unless authorized by the contracting officer to substitute one or more subcontractors to perform such work.
A contractor shall be subject to penalties if, without obtaining the approval of the contracting officer, the contractor—
replaces a listed subcontractor for a contract with an executive agency; or
awards a subcontract to a subcontractor to perform work which the contractor had identified as work to be performed directly by the contractor.
A subcontractor shall also be subject to penalties if the subcontractor is determined to have knowingly participated in the failure of the contractor to comply with the regulatory provisions relating to the substitution of a listed subcontractor.
Amount of penalties To be imposed
The amount of penalties imposed under this section shall be equal to the greater of—
10 percent of the amount of the bid by the listed subcontractor;
the difference between the amount of the bid by the listed subcontractor and the amount of the bid by the substituted subcontractor; or
the difference between the amount of the bid by a substituted subcontractor and the dollar value specified by the contractor for the work which the contractor had listed for its own performance.
Source of funds for penalties
Penalties assessed pursuant to this section shall be deducted from the remaining unpaid contract balance and deposited into the fund from which the contract was awarded.
Grounds for suspension or debarment
The imposition of penalties on a contractor or subcontractor for failure to comply with the procedures for the substitution of subcontractors on 2 contracts within a 3-year period shall be deemed to be adequate evidence of the commission of an offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor within the meaning of part 9.4 of the Federal Acquisition Regulation (Debarment, Suspension, and Eligibility) (48 CFR 9.4).
Implementation through the Federal Acquisition Regulation
Proposed revisions to the Government-wide Federal Acquisition Regulation to implement the provisions in this Act shall be published not later than 120 days after the date of the enactment of this Act and provide not less than 60 days for public comment.
Final regulations shall be published not less than 180 days after the date of the enactment of this Act and shall be effective on the date that is 30 days after the date of publication.