On May 16, 2017, Philadelphia voters approved a ballot measure amending the Home Rule Charter (the “Amendment”) to allow the City to enter into contracts for certain goods and services based on “best value.” Best value contracting is the practice used by the federal government, many states, and nearly all of America’s twenty largest cities. But what does “best value” mean and how will it change the way contractors bid on City projects?

In evaluating bids for certain professional services, such as legal or IT services, the City has long been permitted to consider factors beyond just cost — considerations like vendor history or past performance. However, before passage of the ballot measure, the City’s Home Rule Charter required construction-related goods and services contracts valued at greater than $25,000 to be awarded to the “lowest responsible” bidder. Under this standard, as long as the contractor was deemed “responsible” enough to perform the scope of work, the City was legally obligated to award the contract to whoever submitted the lowest bid. The sole consideration was essentially the bid amount.

Critics of the old system argued that it failed to capture a number of important factors that would help provide the City with the most “bang for its buck,” such as vendor history, past performance, budget, schedule, and workforce diversity. On the other hand, an argument often cited against the “best value” system was that allowing the City to account for criteria besides cost could lead to cronyism or awarding contracts based on other improper considerations.

From practical standpoint, the Amendment should not result in earth-shattering changes for contractors who submit bids for City work. Indeed, most contracts will likely still be awarded to the lowest responsible bidder. The best value standard can only “kick in” and be applied when the Procurement Commissioner determines that awarding the contract to the lowest bidder would not yield the best value to the City. The City presently anticipates only about 5% of contracts (or 10 to 12 on an annual basis) will be affected by the transition to the best value system.

Pursuant to the Amendment, the Procurement Commissioner is tasked with considering several factors in addition to price. Those factors include:

  • integration of technical or professional service elements;
  • quality differences among products and services;
  • incorporation of City contracting objectives, including participation of disadvantaged business enterprises; and
  • “other attributes” that make price alone a poor indicator of value.

The Amendment also directs the Procurement Department to propound regulations identifying additional factors to be considered in making a “best value” award. The proposed regulations will be posted for public comment, so those affected will have the opportunity to provide feedback.

Beyond the “best value” factors, the new system includes more disclosure obligations that must be made at the time of bid submission. The obligations are as follows (codified in § 17-400 of the Philadelphia Code):

  • campaign contributions made by the contracting company (if submitting a bid on behalf of the company) to City politicians;
  • campaign contributions made by the individual or an immediate family member (if submitting the bid as an individual) to City politicians;
  • the name of consultant(s) used in obtaining City contracts;
  • campaign contributions made by the consultant(s);
  • the names of subcontractors that will be used (in the event the contract is awarded to the bidder);
  • whether City employee(s) requested money, services, or something of value; and
  • whether City employee(s) provided advice on satisfying minority, women, disabled, or disadvantaged business participation goals.

Companies contributing $11,900 or more per calendar year to a City politician or political candidate, as well as individuals contributing $3,000 or more per calendar year, will not be eligible to be awarded contracts valued at $25,000 or greater for businesses and $10,000 or more for individuals, during the candidate’s term in office.

The City expects to post its first best value contract opportunity within the next six to nine months. Contractors planning to submit bids should track their contributions to City candidates and officeholders and watch out for the new regulations from the Procurement Department.