In the latest issue of The Wright Toolbox:
2019 GAO Bid Protest Annual Report – read now
Virginia Contractors Looking to End “No Limits” Policy – read now
2019 GAO Bid Protest Annual Report
On November 5, 2019, the Government Accountability Office (“GAO”) issued its annual Bid Protest Report to Congress for Fiscal Year 2019. During 2019, the GAO received 2,198 protests (down 16% from the year before). Of the protests resolved on the merits during 2019 (587), only 13% were sustained. The most prevalent reasons for sustaining protests during 2019 were: (1) unreasonable technical evaluation – for example, finding that the agency’s evaluation of the awardee’s technical proposal was unreasonable where the record did not support the assignment of three of the five strengths that were cited as discriminators in favor of the awardee; (2) inadequate documentation of the record – for example, finding that the agency failed to adequately document the basis for its intended corrective action of terminating the award to the prior awardee and making award to the prior protester, which was taken in response to an earlier protest; (3) flawed selection decision – for example, finding that the agency’s best-value tradeoff decision was unreasonable and inadequately documented where it was based on numerous evaluation errors under the cost/price, past performance, and technical factors, and where the record did not demonstrate that the selection official considered the qualitative aspects of the quotations or justified why any advantages of the awardee’s quotation were worth the price premium; (4) unequal treatment – for example, finding that the agency unequally evaluated quotations where both the protester and the awardee did not propose retention techniques focused on cleared personnel, but only the protester’s quotation was evaluated as having a weakness on that basis); and (5) unreasonable cost or price evaluation – for example, finding that the agency performed a price realism analysis that was not permitted by the solicitation.
The GAO noted that a significant number of protests filed with the office do not reach a decision on the merits because agencies voluntarily take corrective action in response to a protest rather than defend the protest on the merits. Agencies are not required to report the reasons for deciding to take voluntary corrective action. The GAO also reported that its “Effectiveness Rate” for 2019 was 44%, the same as 2018. The Effectiveness Rate is based on a protester obtaining some form of relief from the agency, as reported to the GAO, either as a result of voluntary agency corrective action or the GAO sustaining the protest. Of interest, the Report notes that alternative dispute resolution (“ADR”) was used in 40 cases (down from 86 in 2018) and that the ADR process was 90% successful in resolving the cases. If you were looking forward to having your day in “court” regarding your protest with the GAO, don’t count on it, in 2019 the GAO conducted merit hearings in just 21 cases (just 2% of its cases).
While the direct sustain rate at the GAO remains low at 13%, perhaps the more accurate measure of results is the Effectiveness Rate, which reflects the percentage of time that a protester obtains some form of relief. Thus, protests result in some form of relief almost 57% of the time.
Virginia Contractors Looking to End “No Limits” Policy
In many cases, a party only has a certain amount of time to file a lawsuit in the event it has been wronged. The time period to file a suit is often set by a “statute of limitations.” One example, from Virginia, is that a party has five years to file an action on a written contract. As such, construction contracts fall under this five-year umbrella. Therefore, a party has to sue on a construction contract within five years, right? Well, it depends. If you are the Commonwealth of Virginia, the answer is a resounding “NO!” In fact, the Commonwealth, and its agencies, are not limited to any time period at all.
The lack of any limitation derives from the common law doctrine nullum tempus occurrit regi, which translates to “time does not run against the king.” The doctrine of nullum tempus has been around since the 1250s and stands for the proposition that the sovereign is not subject to statutes of limitations on its causes of action. In Virginia, nullum tempus is codified by statute in § 8.01-231 of the Virginia Code, which states, “[n]o statute of limitations which shall not in express terms apply to the Commonwealth shall be deemed a bar to any proceeding by or on behalf of the same.” As stated earlier, the doctrine applies only to claims of the Commonwealth of Virginia and its agencies. It does not apply to the claims of local governments, municipalities, etc. In 1988, the General Assembly extended nullum tempus protections to public institutions of higher education, and it has been Virginia universities that have used this doctrine to their advantage.
As one could imagine, nullum tempus comes into play in the context of latent defects. About ten years ago, on the campus of the College of William & Mary, it was determined that a contractor had not properly connected a building’s brick facade after the bricks started peeling off the building and falling down. William & Mary sued the contractor many years after the completion of the project and prevailed. More recently, a latent defect was discovered on Virginia Tech’s campus when part of a structure began to fail due to improperly installed drywall. The work was substantially completed in 1998. In April 2012, Virginia Tech asserted a claim against the contractor under the prime contract, seeking $7,186,178 in compensation for the cost of remedying the defective workmanship. In 2014, the contractor paid $3,000,000 to settle the claim as there was no time limit barring Virginia Tech from bringing litigation against the contractor.
For contractors, this exposure to potential liability for an indefinite amount of time is problematic to say the least. This issue is not lost by some members of the Virginia General Assembly who have introduced bills to impose a five-year statute of limitations on the Commonwealth and its agencies. Unfortunately, to date, these bills have stalled in the legislature. As such, further advocacy and input from those in the construction community is needed to get the ball moving again.
The specter of liability for eternity for contractors does have consequences. For one, some contractors simply shy away from working on state projects. For those contractors who continue to accept state work, they may now build some of this financial risk into their budgets that could increase the costs of projects. Another issue is that the Commonwealth can bring claims against contractors for defects that simply arose due to wear and tear over the years. If this is 10, 15, or 20 years after the work was completed, the contractor may not have the documentation necessary to adequately defend such a claim. With such never-ending exposure, contractors may also struggle to get liability insurance or necessary bonding.
In Virginia, the Associated General Contractors of Virginia (AGCVA) is actively advocating for the passage of a bill to create a statute of limitations. If you are a contractor who wants more information or wishes to share thoughts or input on this issue, you can contact Gordon Dixon, CEO of the AGCVA at email@example.com. Of course, if you have questions on the legal side, feel free to reach out to us!
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