SB95 by Norris/HB84 by McCormick – Dept. of General Services

This bill was part of the administration’s package and revises certain provisions of Tennessee’s procurement code as follows:

Section 1: Rewrites the cooperative purchasing agreements statute (Tenn. Code Ann. § 12-3-701) to authorize the central procurement office and public institutions of higher education to participate in cooperative purchasing agreements for the procurement of goods or services with the cooperation of other states or local governments. The bill specifies that cooperative purchasing must be awarded through “full and open competition.”

Section 2: Rewrites the protest procedure statute (Tenn. Code Ann. § 12-3-514) to provide more detail with regard to a party’s standing to protest and to the calculation of the protest bond. The bill revises the procedure as follows:

A. Time

Previously: A protest must have been submitted in writing within seven calendar days after the claimant knew or should have known the facts giving rise to the protest. A stay of award may have been requested in the case of a pending award.

Now: A protesting party may submit a protest within seven calendar days after (a) the earlier of the notice of the award or (b) intent to award the contract is issued. Regarding a stay, the bill revises the requirement to specify that a stay of the solicitation, award, or proposed award will be granted upon receipt of a protest and the accompanying protest bond. A stay issued under this provision must not be lifted unless, after giving the protesting an opportunity to be heard, the chief procurement officer or the protest committee makes a written determination that continuation of the procurement process or the award of the contract without further delay is necessary to protect the interests of the state.

B. Protest Bond

Previously: Neither a protest nor a stay of award could proceed until the protesting party posted a protest bond payable to the state in the amount of 5% of the lowest cost proposal evaluated or, if a protest was filed prior to the opening of cost proposals, the bond payable must have been 5% of the estimated maximum liability provided in the procurement.

Now: The amount of a protest bond will be:

  • 5% of the lowest bid or cost proposal;
  • 5% of the maximum or estimated maximum liability;
  • 5% of the estimated maximum revenue if the contract at issue will be revenue producing to the state; or
  • In the case of a no-cost contract, an amount to be determined by the chief procurement officer.

C. Payment of Bond

Previously: The protest bond was immediately payable to the state conditioned upon a decision by the protest committee that:

A request for consideration, protest, pleading, motion or other document was signed, before or after appeal to the chief procurement officer or protest committee in violation of the provisions regarding certification of such documents;

  1. The protest had been brought or pursued in bad faith;
  2. The protest did not state on its facts a valid basis for protest; or
  3. For any other reason approved by the protest committee.

Now: The protesting party will have an opportunity to oppose payment of the protest bond prior to the bond being payable to the state upon a finding of:

  1. The protest was signed, before or after appeal to the chief procurement or protest committee in violation of the provisions regarding the certification of protest documents;
  2. The protest has been brought or pursued in bad faith;
  3. The affected state agency has suffered damages resulting in a loss of funding, increased expenditures, or a disruption in services; the protest was filed in bad faith or in violation of the provisions regarding certification of protest documents; and the protest was not upheld;
  4. The protest did not state on its face a valid basis for protest; or
  5. For any other reason approved by the protest committee.

D. Minority-Owned Businesses

Previously: A minority-owned business, woman-owned business, service-disabled veteran-owned business, or a small business protesting party could submit a written petition for exemption from the protest bond requirement if the lowest bid or lowest evaluated cost proposal was less than $1 million.

Now: Such minority businesses may petition for an exemption from the protest bond requirement if the estimated maximum liability, estimated maximum revenue, or lowest evaluated cost proposal for the procurement is less than $1 million.

E. Promulgation of Rules

The legislation authorizes the promulgation of rules by the procurement commission with regard to protest procedures.

Section 3: Rewrites the authority of the chief procurement officer to authorize limitation of liability clauses in state contracts (Tenn. Code Ann. § 12-3-701).

Previously: The chief procurement officer could authorize the procurement of goods and services through a solicitation process in which a limitation of liability was authorized by the chief procurement officer and set forth in the documents initiating the solicitation process. The circumstances in which such procurement was permitted and what types of limitations could be allowed was determined by the policies or rules and regulations of the procurement commission.

The chief procurement officer could not authorize limitation of the liability of a contract to an amount less than two times the value of the contract unless the chief procurement officer determined, and the comptroller approved, that:

  1. Allowing the limitation of liability was necessary to prevent harm to the state from failing to obtain the goods or services sought, or from obtaining the goods or services at a higher price, if the state refused to allow a limitation of liability as long as all respondents were offered the same opportunity as provided in the solicitation;
  2. The limitations and any alternative contract language were commercially reasonable in light of the risks to the state created by the type of goods or services purchased and the purposes for which they would be used; and
  3. The state did not agree to limit the liability of any contractor for intentional torts, criminal acts or fraudulent conduct.

The chief procurement officer and the comptroller could permit a limitation of liability to an amount not less than two times the maximum liability under the contract, notwithstanding any other law to the contrary, as long as the limitation of liability did not apply to intentional torts, criminal acts, fraudulent conduct or acts or omissions that result in personal injuries or death. Additionally, if the chief procurement officer determined that it was necessary to protect the interests of the state to increase the limitation of liability to an amount greater than that authorized by the provisions above, the chief procurement officer, comptroller, and the commissioner of finance and administration could increase the limitation of liability of the contractor to an amount more than two times the value of the contract.

Now: Generally, the chief procurement officer may authorize the procurement of goods and services with a limitation of a contractor’s liability; provided, all respondents to a solicitation have an equal opportunity to request a limitation of liability. With respect to the amount of the limitation, the following rules apply:

  1. Unless otherwise authorized by the chief procurement officer under this act, no contract shall limit a contractor’s liability to the state in an amount less than two times the maximum liability, estimated liability or maximum revenue of a contract;
  2. The chief procurement officer may authorize a limitation of liability amount of less than two timesthe maximum liability, estimated liability or maximum revenue of a contract if the chief procurement officer determines that the limitation of liability is necessary to prevent harm to the state from failing to obtain the goods or services sought or from obtaining the good or services at a higher price;
  3. The chief procurement officer is authorized to approve a limitation of liability amount greater than two times the maximum liability, estimated liability or maximum revenue of a contract if the chief procurement officer determines that an increase in the liability amount is necessary to protect the state’s best interests;
  4. A solicitation that includes a limitation of liability amount of less than two times the maximum liability, estimated liability or maximum revenue of a contract requires approval by the comptroller before the limitation of liability may be included in the contract; and
  5. A solicitation that has no maximum liability, estimated liability or maximum revenue of a contract may have a limitation of liability if approved by the chief procurement officer and the comptroller, and if all respondents to the solicitation had an equal opportunity to request a limitation of liability.

Additionally, the bill specifies that a limitation of liability in a contract with the state shall not apply to:

  1. Liability for intellectual property or to any other liability, including, without limitation, indemnification obligations for infringement of third-party intellectual property rights;
  2. Claims covered by any specific provision in a contract with the state providing for liquidated damages; or
  3. Claims for intentional torts, criminal acts, fraudulent conduct, or acts or omissions that result in personal injuries or death.

The procurement commission is authorized to promulgate rules, policies and procedures to implement the above provisions.

Status: Enacted as Public Chapter 272 (effective 4/28/15)

Link to Public Chapterhttp://www.tn.gov/sos/acts/109/pub/pc0272.pdf

SB589 by Tate/HB696 by Akbari – Major procurement contracts

Amends Tenn. Code Ann. Title 4 by adding a new Chapter 39 as follows:

  • Requires major procurement contracts between a state governmental entity and a vendor to contain a provision that the vendor and the vendor’s subcontractors will collect and remit sales and use taxes on sales of goods and services made by the vendor or the vendor’s subcontractor.
  • Requires the vendor to include the same provision in a contract with a subcontractor.
  • Defines “major procurement contract” as any good or service costing more than $75,000, including major advertising contracts, annuity contracts, consulting services, equipment, and other products and services unique to the functions performed by the state governmental entity, but not including materials, supplies equipment and services common to the operations of any ordinary business.
  • Defines “retailer” as a person or entity that sells goods or services on behalf of a state governmental entity.
  • Defines “state governmental entity” as a state agency, department, board or commission, or a public corporation or quasi-public instrumentality that performs essential public functions entrusted to it by the state.
  • Defines “vendor” as a person or entity that provides or proposes to provide goods or services to the state governmental entity pursuant to a major procurement contract, but does not include an employee of the state governmental entity, retailer, or state governmental entity.

Status: Enacted as Public Chapter [pending] (effective 7/1/15)

Link to Public Chapter: [pending]

SB831 by Yager/HB702 by Kumar – Advertising by local government entities

Amends Tenn. Code Ann. Title 12, Chapter 3 as follows:

  • Notwithstanding any charter provision, private act or other law to the contrary, authorizes local government entities having centralized purchasing authority with a full-time purchasing agent, by resolution or ordinance, to increase the threshold over which public advertisement and sealed competitive bids or proposals are required to an amount not to exceed $25,000 for nonemergency, nonproprietary purchases.
  • Requires at least three written quotations whenever possible for purchases costing less than the bid threshold established for public advertisement and sealed competitive bids or proposals but more than 40% of such bid threshold or some lower amount as established by the governing body in the resolution. Purchases of like items will be aggregated for purposes of the bid threshold.

Status: Enacted as Public Chapter 457 (effective 5/18/15)

Link to Public Chapterhttp://www.tn.gov/sos/acts/109/pub/pc0457.pdf

SB978 by Norris/HB823 by Lollar – Public works projects requiring a registered architect

This bill amends Tenn. Code Ann. Section 62-2-107(b)(1)(A). Presently, the state and political subdivisions of the state are prohibited from engaging in the construction or maintenance of any public work involving architecture, engineering or landscape architecture for which the plans, specifications and estimates have not been made by a registered architect, registered engineer or registered landscape architect. The general prohibition does not apply if:

  1. The contemplated expenditure for the complete project does not exceed $25,000, and the work does not alter the structural, mechanical or electrical system of the project; or
  2. The contemplated expenditure for the complete project does not exceed $100,000, the project is located in a state park and the work is solely maintenance, as defined in the policy and procedures of the state building commission.

The bill increases the threshold amount under (a) to $50,000.

Status: Enacted as Public Chapter 403 (effective 5/8/15)

Link to Public Chapterhttp://state.tn.us/sos/acts/109/pub/pc0403.pdf