Responsive or not?

“A non-conforming bid is no bid at all.” So says a New Jersey court, thus illuminating the issue of responsiveness for public procurement professionals and contractors. Individual state and local governments have varying rules governing issues of responsiveness and rejection of bids and proposals. This article uses two recent cases to highlight the special problems in applying concepts of responsiveness in requests for proposal (RFPs).

Kirk Buffington and Michael Flynn’s NIGP textbook, The Legal Aspects of Public Purchasing, explains the responsiveness rules and the policy behind them. In traditional competitive bidding, a public agency has a duty to reject those proposals that are not responsive, such as those that fail to comply with the invitation to bid in a material way. The responsiveness rule requires substantial conformity to specifications and solicitation terms; the rule promotes objectivity and fairness in the public bidding process. Moreover, the responsiveness requirement ensures that vendors are competing on an equal footing. It further promotes a long-held policy of protecting against abuses such as fraud in connection with the awarding of contracts. As Buffington and Flynn describe, a vendor could learn during the public bid opening how its bid compared to competitors and then try to revise or withdraw a bid considered improvidently submitted. The companion rules about waiver of minor informalities in bids and withdrawal of a bid for mistakes protect against these abuses.

The application of the responsiveness concept to requests for proposals is more difficult. In many jurisdictions, there is an opportunity in requests for proposals (sometimes called “competitive negotiation”) for the government and offerors to communicate after submission of proposals. There may be exchanges to clarify aspects of the proposal. Further, there may be discussions or negotiations regarding certain aspects of the proposal. In some cases, proposal revisions may even be invited. The question then becomes, “What purpose does the responsiveness concept serve in a request for proposal?”

Unlike competitive sealed bidding, in RFPs proposal contents are not disclosed at a public proposal “opening.” As a result, withdrawals of proposals at opening and other anticompetitive behavior seldom occur. Given the possibility that proposals may be discussed or even revised, should black-and-white concepts of responsiveness be applied the same way?

State laws vary in this regard. At one end of the spectrum, a New Jersey court proclaimed that a “non-conforming bid is no bid at all” in the context of a request for proposal for a statewide contract for furniture. [In re Jasper Seating Co., Inc., 967 A.2d 350 (N.J. 2009).]

In Jasper, the state solicited proposals for a state contract for non-modular office furniture. The solicitation required firm pricing for 18 months. The RFP stated that “stickers” showing price increases on previously published price lists were not acceptable. According to the RFP, only the most recent preprinted price list was acceptable.

Jasper submitted a proposal on two furniture lines, but pricing deviated from RFP instructions. The proposal included Jasper’s pre-printed list price catalogs, normally used for its commercial customers, which had stickers on the covers indicating that prices would increase by 4 percent on a specified date during the performance period. The state rejected Jasper’s proposal as nonconforming. Jasper protested, and when it received no administrative relief, Jasper sued.

The court upheld the agency’s determination that the bid was nonresponsive. The court applied sealed bid precedent and a materiality test to the question of whether the proposal was responsive at the time of submission. The court applied previous precedent and concluded that material deficiencies existing at the time of proposal submission could not be cured through clarifications. The Jasper court tested materiality of the nonconformity at the time of proposal submission, similar to sealed bid analysis.

The commonwealth of Pennsylvania, on the other hand, has taken a different approach – a more liberal one and one closer to the federal rule. [Language Line Servs., Inc. v. Dep’t of Gen. Servs., 991 A.2d 383 (Pa. Commw. Ct. 2010).] In federal procurement, for example, the term “acceptability” has been used to describe whether an offeror’s proposal complies with the request for proposals, a standard that permits considerable discretion.

In Language Line, Pennsylvania’s Department of General Services issued an RFP to procure statewide interpretation, translation and language authentication services for commonwealth executive agencies. Language Line submitted a proposal for the interpretation services.

The RFP stated that the commonwealth would limit discussions to offerors that “have submitted responsive proposals and … whose proposals the Issuing Office has determined to be reasonably susceptible of being selected for award.” All proposals were deemed to be responsive. However, Language Line was not invited to submit a best and final offer (BAFO) because it had received no points for its disadvantaged business participation, a major evaluation factor. Language Line protested and, when the protest was denied, filed suit.

One of Language Line’s claims was that the successful awardee’s proposal had not met several mandatory requirements. Language Line alleged that the awardee’s proposed program manager did not have the required minimum experience, and the awardee’s proposal failed to identify its customer service personnel or demonstrate that they had the required experience. The court upheld the competitive range process, found the competitive range determination to be a reasonable exercise of discretion, and approved the evaluation. With respect to the claim of nonresponsiveness, the court stated, “there were only two mandatory responsiveness requirements in the RFP at issue – timeliness of receipt and proper signature.”

In Pennsylvania, the procurement code language is very close to that used in the American Bar Association’s Model Procurement Code, which is patterned after federal procurement practice. Application of the federal analysis to these issues likely would have been closer to the Pennsylvania court rationale. Where an RFP contemplates clarification discussions and even proposal revisions, a proposal may be considered acceptable for proceeding to evaluation if the proposal would not require significant revision (e.g., a substantial rewrite) to meet requirements. Of course, the nature of the deficiencies could be considered in the evaluation and might preclude consideration of the proposal as one in the competitive range or inclusion on the “short list.”

There are lessons here for both governments and vendors. Companies should exercise caution when parsing solicitation instructions and strategizing about how to address requirements. With terms and conditions, in particular, governments may take different approaches regarding whether a proposal is “responsive” if a proposal includes alternative pricing approaches, limitation of liability provisions, modified intellectual property clauses or even common warranty disclaimers.

There may be better alternatives to simply taking exceptions to solicitation terms. Early market research communications with procurement personnel can convey industry concerns with terms and conditions. The typical question-and-answer period in a solicitation can be used to gauge whether supplemental or revised provisions are simply discouraged or – worse – disqualifying.

Even in jurisdictions that apply a more liberal acceptability standard to proposals, an offeror may not get an opportunity to discuss or revise its proposal. A proposal may be considered acceptable (and not be rejected) but still contain exceptions that are less favorable compared to another offeror’s proposal submitted strictly in accordance with RFP instructions. In short, an offeror may not get a chance to fix a problem with its proposal.

Agencies should use care in application of responsiveness rules. Buffington and Flynn highlight the harsh consequences on bidders and agencies when bids are rejected. In RFPs, the consequences can be even more significant because the stakes in lost business are often higher, and companies expend considerable time and effort in assembling teams to develop proposals.

While individual statutes and ordinances may limit flexibility, some governments permit (but discourage) exceptions to terms and conditions. The solicitation instructions should state explicitly how exceptions will be treated. And however an agency deals with the issue of exceptions and responsiveness, similarly situated companies should be treated equally.

Sometimes very good proposals include exceptions to RFP terms. Some exceptions make sense in the context of a given proposal approach. Intellectual property rights boilerplate, for example, may require some “tweaking” to make the clause work in the context of specific performance involving prime contractors, subcontractors and suppliers. These clarifications often do not involve substantial rewrites of boilerplate. But RFP language that absolutely precludes the possibility of discussing these kinds of issues may close the door on the opportunity.

Procurement professionals should discuss this issue with their legal counsel and have an approach to these issues. Do proposal deviations have to be treated as a responsiveness issue in your jurisdiction? Can exceptions to terms and conditions at least be considered and evaluated? Answers to these questions are important to governments and industry.

About the author

Richard Pennington, CPPO, C.P.M., J.D., LL.M. is an NIGP Individual Member. He served as an assistant attorney general (procurement and contract law and litigation) and State Purchasing Director for the State of Colorado.