The meeting was opened by Chair David Churchill at 8:30 AM. The minutes of the Feb. 27, 1999 Midyear Council Meeting at Annapolis, MD, were considered and approved.

Don Gavin reported on the work of the ad hoc committee to revise the report to accompany the Procurement Principle on Allocation of Risk when it is submitted to the House of Delegates for ABA approval. Mr. Gavin and Judge Burg had convened two meetings of the committee, with wide Section participation, in the effort to produce a consensus report. The final product balances the concerns expressed at the previous Council meeting. Approval of the revised report was moved and seconded, and was approved by the Council on voice vote, with Council Member Judge Mary Ellen Coster Williams abstaining.

John Clark, PCL Section Liaison from the ABA Board of Governors reported that the recently imposed increase in ABA dues has gone into effect with a minimum reaction from the membership. He noted that the financial condition of the association therefore remains good and the requirement for heroic action to cut costs further beyond recent successes or raise money in the near future has been averted. The ABA continues to struggle with the very difficult issue of multidisciplinary practice, and it was noted that accounting firms are now among the largest law firms in the world. In the tax court, accountants are allowed to sign protests. In Europe, Asia and Australia the roles are blurring and it is becoming increasingly difficult to control the practice of law within the profession at large. Many sections of the ABA are interested in the issue, and the Public Contract Law Section has a particular interest because we maintain associate memberships for government contract professionals who are not attorneys. ABA members will be invited to express their views at the Atlanta meeting. An ABA Special Commission is working on the subject of Technology issues facing the ABA. A proposed corporate sponsorship by Lexis has run into complications. In general many of the sections are doing well in the adoption of advanced technology for delivery of association services to the membership, but the ABA itself seems to be doing less well. Chair Churchill stated the Public Contract Law Section should pay close attention to this issue and participate fully in the development of ABA technology policy. The Chair commended Mr. Clark for his assistance to the Section.

Chair Churchill introduced Marcia Madsen, who reported that Angela Styles, Chair of the Legislative Coordinating Committee, had just had a baby. In her absence Ms. Madsen reported on the urgent legislative issues surrounding HR 775 and S 96 regarding Y2K liability and related issues. The Committee proposes a letter to Congressman Davis calling his attention to issues of concern to the Section. Donna Yesner has followed the issues closely and prepared the proposed letter. The legislation would limit litigation in various ways and is therefore controversial in Congress and within the ABA. PCL Section does not propose to take positions on these substantive issues. But we need to insure that the drafters are aware that they are not taking account of the Contract Disputes Act. The bills do not recognize the government’s rights under the CDA and imposes procedural/jurisdictional rules inconsistent with the CDA. This suggests that the goal of the bill to limit litigation will not be met in the case of government contracts, because these provisions could themselves generate large amounts of litigation. The proposed letter to Congressman Davis informs his staff of this drafting issue. Bob Murphy noted that the original bill in the House was intended to leave government contractors in the same position as commercial transactions, but the language actually used leaves them worse off. Allan Joseph questioned what rule would apply to subcontractors if a different rule is prescribed for government and commercial transactions.

Ms. Madsen noted the urgency of the matter and suggested the Section should proceed to request blanket authority and immediately notify Congress of the problem. Greg Smith noted it would be premature to request authority prior to agreeing on language, since it would have to be resubmitted. Agnes Dover suggested termination will often be the context in which issues arise, and therefore it seems important to deal with the proposal for a 90 day cooling off period. Allan Joseph observed that warranty, latent defects and other traditional government contract issues are also likely to arise. Ms. Madsen confirmed her experience in this regard. John Preston indicated any new procedural rules should apply to claims for and against the government.

Judge Mary Ellen Coster Williams noted that the council had not had time to consider the proposed letter, which had been distributed only after the meeting began. She supported the Chair’s suggestion that an ad hoc committee was required to bring a recommendation before the Council on an urgent basis. The Chair appointed Bob Murphy, Allan Joseph, Marcia Madsen, Agnes Dover and Donna Yesner to the ad hoc committee to draft the letter, seek Council approval and blanket authority. The motion was approved.

Tom Barletta presented the report of the Task Force on Price Based Contracting. During March the group met to hear a presentation by Bill Stussie, who is heading up the DoD Price Based Contracting Working Group. Karen Grasso is counsel to the working group. The working group expects to produce a report in midsummer, and Ms. Grasso has suggested that the Section defer its comments on the matter until we see the report of the working group. The goal of the working group is to make the contracting process more user friendly for commercial companies, and one target of their inquiry is TINA. There will be a program on this subject at the Annual Meeting in Atlanta, and Mr. Stussie will participate. The Emerging Issues Committee is also looking into these issues, and it was noted that the R&D Committee and the Commercial Products and Services Committee also have an interest. Harvey Gordon noted that the report will be a recommendation to Dr. Gansler. It is expected to be published in the Federal Register and will deal with controversial subjects such as TINA, CICA, award fee changes, and contract financing. Therefore it is difficult for DoD to reach consensus on the issues in the report. Dave Hirsch suggested perhaps we should assist by commenting even before it is published. Kevin Flanagan suggested we should wait until there is a specific position to comment on, and the Chair agreed.

Ross Branstetter reported on the activity of the International Procurement Committee which is working with the International Law and Practice Section’s International Procurement Committee to follow the process being used by DoD to reinvent the security assistance process. The committees expect to seek blanket authority, and the Chair urged them to coordinate their efforts carefully with the Legislative Coordinating Committee.

Alan Peterson requested the Section to examine issues raised by the DOE program to dispose of spent nuclear fuels. He noted a potential for claims and litigation over issues relating to the cost of money in DOE contracts. Mr. Peterson’s recommendation would be that DOE adopt policies and practices similar to those represented by DoD’s clause prescribing rules for the payment of interest on contract claims. The Chair suggested the Accounting, Cost and Pricing Committee should look into the matter. Greg Smith suggested the Federal Claims and Remedies Committee would also be interested. Agnes Dover noted that the claims are not filed under the CDA, but are permitted by the Nuclear Waste Disposal Act applicable to these DOE operations. Carl Vacketta stated that an interest on claims clause was used in the early 70’s, prior to the CDA. Ruth Burg suggested a task force be appointed with representation from both committees. The Chair indicated he would ask Agnes Dover to head a task force and would appoint other members.

Alex Britten presented the report of the Regulatory Coordinating Committee, and the Chair commended Herman Levy for the tremendous amount of careful editing work he has done.

Mark Colley reported on the work of the task force on Scanwell Sunset, chaired by David Dowd. The task force recommends that the Section should comment before legislation is proposed. It is understood the GAO would welcome the Section’s comments and also would welcome Section assistance in fact finding. GAO intends to survey counsel for plaintiffs and intervenors in all known cases in District Court and would like the Section to comment on the questionaire to be used. David Dowd presented information obtained from DOJ concerning protests and where they are filed.

Unfortunately, DOJ apparently does not have complete records and some other method is needed to establish a complete record in this area. Marshall Doke noted that the list appears to include only cases which went to judgement and does not include cases of which some Section members are aware. Issues raised are (1) access to courts, (2) uniformity of law, (3) expertise of adjudicators, and (4) jurisdictional issues. Pat Meagher stated that the views of counsel outside Washington and also of small business should be solicited. The Chair commended the committee’s efforts and requested that they prepare a definitive report for the Atlanta meeting.

Alison Doyle reported on the status of the ethics issues and the question of contact by US Attorneys with employees of companies represented by counsel. Efforts led by Sen. Hatch to repeal the McDade bill failed, and therefore it went into effect on April 19, requiring compliance by federal prosecutors with state professional ethics requirements. Attorney General Reno met with ABA representatives and issued implementing regulations. In spite of prior disagreement, the two ABA groups primarily interested in the issue, Ethics 2000 Committee and the Standing Committee on Ethics, the ABA task force is committed to publishing a consensus report for the Atlanta meeting. In the meantime, the conference of state supreme court justices is also looking at the issues. Stay tuned.

The CDA Working Group reported on their bottom-up, clean slate look at the CDA. The group is considering whether to recommend improvements in remedies, such as injunctions, waiver of sovereign immunity, at forum issues, such as whether there should be a choice of a court or board, and procedural issues. The Chair requested the group to prepare a meaningful report for the Atlanta meeting.

Carl Vacketta announced the anniversary issue of the PCL Journal will be devoted to the CDA. The Chair commended Carl Vacketta and Bobbi Pollock for successful management of the Section’s publications.

Michael Hordell reported that the Phoenix program chaired by Agnes Dover and Maryanne Lavan was very successful. He also reviewed program plans for the annual meeting. The Chair commended Michael Hordell and David Fowler for their excellent program work.

Rob Schaefer reported on the Arizona state activities, which have been extensive.

The Chair introduced Lawrence Hill, Law Student Division representative to the Section. Lawrence is a student at Chicago Kent College of Law, which is affiliated with Illinois Institute of Technology. Chicago Kent/IIT is noted for its work at the intersection of law and engineering in such areas as environmental remediation. The law school also has an extensive urban law clinic and a very aggressive legal writing program. The Council welcomed Mr. Hill and anticipates his active participation during the remainder of the year.

The Council recessed at 10:40 AM, and resumed at 11:00 AM.

The Chair introduced discussion of the report of revisions proposed for the Model Procurement Code. He commended Margaret McConnell and John Miller for their efforts in managing the revision project. Ms. McConnell introduced two Arizona state procurement officials who had been active in the revision process and were present at her request to respond to questions concerning the needs or views of state officials. They were John Adler, Procurement Executive for the State of Arizona, and Alec Turner, Special Assistant to ADOT for procurement. The Chair introduced Tom Madden and Craig Othmer, and requested that they Chair and facilitate the Council’s discussion and consideration of the proposed revisions. Tom Madden noted the importance of defining the Section’s position on as many issues as possible in order to meet our intended schedule for joint presentation of the revisions in Atlanta by the Sections of PCL and State and Local Government Law.

John Miller identified substantive changes and corrections in the draft, which had been made since the publication of the Council’s agenda book. He presented the history and structure of the revision project and explained that the revision needs approval from the Councils of both Sections prior to submission to the House of Delegates to make it an ABA approved document. The proposed changes fall into four focus areas: flexibility in the procurement process, electronic commerce, cooperative purchasing, and infrastructure procurement. The revision project did not address MPC articles 9, 11, and 12, (socioeconomic provisions, disputes, ethics) because many states adopting the prior MPC have not adopted these articles which are widely believed to be outside the scope of a local procurement code. For example, many states regard disputes processes to be correctly covered by the state’s general jurisdiction provisions.

To organize the discussion, an agenda was announced by Mr. Madden which was to consider the four focus areas, then the views of three Section committees which had offered comments on the revision, then three individual Section member comments which had been received, and finally to conclude with discussion and sharing of views by all those present.

Cooperative Purchasing. Craig Othmer introduced the discussion of cooperative purchasing. Marshall Doke expressed concern that small businesses may be disadvantaged by centralized purchasing schemes which seem to be facilitated by cooperative purchasing procedures. Hugh Bell suggested that Art. 10-201 should provide for compensation to a bidder who has incurred expense in preparing to respond to an RFP which is subsequently cancelled in order to take advantage of cooperative purchasing. Tom Madden noted that some states prohibit damages in that case, but that in any event Art. 3-301 deals with cancellations and should be sufficient protection for the example cited. Mr. Bell indicated he would not be satisfied with the remedies in 3-301, and he moved to amend the motion to require changes to Art. 10 to compensate bidders for extraordinary expense of B&P costs in the event an RFP is canceled in order to use a cooperative purchasing agreement. It was noted that no such remedy exists in commercial purchasing and Section 3 of the MPC is intended to provide general coverage for remedies. The question was called and the amendment failed to pass.

Norm Thorpe asked the revisers to clarify the definition of "not-for-profit" in 10-101-4, a provision dealing with consortia, and also asked for clarification that vendor agreement is required in order to put in place "piggy-back" purchasing, because some vendors are unable or unwilling to provide the larger quantities to other customers at the prices provided to the first purchasing entity, or they may have issues which arise from their existing distribution agreements and systems. Marshall Doke wondered whether the provisions should apply to MAS and predicted further legislative activity on that front could still authorize state/local cooperative purchasing on Federal MAS schedule.

Electronic Commerce. Mike Love spoke to this and other issues as the Co-Chair of the Model Procurement Code Committee. He stated his agreement with the goal stated by the MPC reporters, that the MPC should "get out of the way" and let the law develop in this difficult area. However, he believes the proposed revision is really making new law in some respects, for example the provision requiring "intent to be bound" in the case of electronic signature. John Miller indicated agreement that this provision could be designated as an alternative to citing the state digital signature act where there is one. Paul Dauer expressed concern that stewardship and accountability required in public procurement is not sufficiently emphasized in the MPC revisions. He indicated a belief that hard paper copy is required to support dispute activity. Mr. Miller indicated the Committee hoped that technology would solve this problem. Carl Vacketta suggested the wiser course would be to avoid the temptation to try to predict the course of electronic commerce and rather we should let the courts figure it out. Pat Wittie observed that revision efforts re Art. 2 of the UCC were going quite far. Don Featherstun noted the need to protect the integrity of electronic transmissions. John Miller stated that no state now enters into contracts electronically, but the goal of the Committee is that when they are ready to do so, the MPC should not be standing in the way. Don Featherstun replied that we should at least provide standards. Ms. McConnell stated that the question of how to do this is under review by NASPE, CIOs, etc. and they are the right people to do it. Tom Madden indicated that the Section’s report should include Paul Dauer’s concern regarding the integrity of the process.

Flexibility for senior procurement officials. Mike Love spoke against the Committee’s recommendations for greater flexibility for procurement officials, noting that public procurement is and should be a regulated process, and we should not support the concept of public officials being allowed to use any source selection method they choose. Great flexibility is already available under existing provisions which do not need to be expanded. Ms. McConnell reported that many situations do not fit within the seven stated exceptions and the result is that ill-fitting procurements are improperly squeezed into categories where they do not belong. This is destructive of the process and does not serve the public interest. John Adler confirmed this view from his own experience and mentioned the need for sunshine in local procurement. Pat Wittie expressed concern with the use of "impractical" as a standard to allow unregulated procurements. The Bid Protest Committee recommended adoption of Federal style hurdles for deviations in this area, such as high level approvals and reports to the legislature. Marshal Doke proposed a "sunshine amendment" as follows: "and a report shall be made publicly available at least annually, describing all such determinations made subsequent to the prior report". Mark Colley, speaking for the Bid Protest Committee, stated a preference for advance notice, except in urgent situations. Mr. Adler confirmed the need of local procurement officials for authority to act quickly in urgent situations. Allan Joseph noted that urgent situations are adequately covered by Section 3-206. He recommended that the issue of emergency procurement be set aside and that the Council should focus on the issues raised when there is no justification for going sole source. Mr. Joseph advocated both pre and post notifications. A vote was taken and the Doke Amendment, calling for notifications after the fact, was passed. Allan Joseph then proposed a second amendment to require prior notification, which was voted and passed. Jerry Walz then moved to delete the "impractical" standard, leaving the only test for use of extraordinary procurement authority as "not in the public interest" to follow the regular procedure. The third amendment to delete "impractical" was approved by consensus.

Art. V: New Project Delivery Methods. Mike Love stated the revisions would take the same approach previously offered and rejected in 1979. He believes the goals of the drafters are good, but the draft falls short, in that it may encourage legislators to limit the delivery methods by listing specific approved methods, rather than encouraging innovation. John Miller responded that local officials seeking innovation have in fact been inhibited by the existing Code. He believes all states are seeking a new, more efficient model. They want to move away from legislating a new procurement system for each major infrastructure program approved. The 1979 Code has not proved to be workable in practice, for example the project to rebuild I-15 through Utah. Local officials were not comfortable launching a $1.2B project using broad statutory authority. The political risk for local officials is too great under existing codes. They want and need something like the draft language to facilitate innovative methods.

Dave Lane confirmed that the prior code did not give adequate confidence to state officials to innovate. We can argue that they had the authority, but the fact is they do not innovate under this language. We should let the regs go further to suggest new methods. Dave Hirsch warned that many large local infrastructure programs are privately funded now, and these must be individually approved by the state government anyway, whatever the regulations provide. Alec Turner confirmed that the Arizona state experience is not good, and that local officials need legislative assurance that "design-build" is OK. However he questioned the need to go beyond that.

Paul Dauer agreed that design-build should be authorized, but that large projects will always be specifically approved by the legislature. He stated concern for abuse, and for the unstated premise which he perceives in the draft: that bigger is better. He recommended that an innovative process which excludes small business should not be endorsed.

John Miller responded that (1) the draft allows for the construction phases of DBO and other innovative methods to be awarded to the low bidding competitive contractor; (2) states really don’t know they can use these methods; (3) competitive bidding is not the only traditional method of contracting for construction services; some very large projects require performers with large capabilities. Mike Love suggested that the list of defined project delivery methods is inadequate, and gave examples of additional methods including leases. John Miller noted that lease transactions are fine, but are not intended to be covered by the Model Procurement Code. Paul Dauer suggested that the title "Infrastructure" was misleading, since infrastructure can include IT systems, telecom, vehicle fleets, etc. and we are really talking about construction. John Miller noted that the central concept is to permit officials to move away from focus on "construction" to broader project definitions including designing, financing, maintaining, operating and other necessary activity. Mr. Miller agreed that the definitions concerning construction would be reviewed and fine tuned to minimize misinterpretations.

There was no motion to amend on these issues, and the Article on Innovative Methods was approved by consensus.

This concluded the discussion of the four major focus areas for the revision, and Mr. Madden proceeded to facilitate discussion of the three Section committee objections to the draft. Full statements of the committee views are contained in the agenda book or were distributed at the meeting.

Commercial Products and Services Committee. Ron Hutchinson proposed that the MPC should learn from Federal experience and should incorporate much of the recently developed TINA exemptions. Mr. Miller and Ms. McConnell noted that state purchasing is already commercial, none use TINA, the few that had used government specifications are moving away from that practice, and pricing is routinely done by price competition or catalog pricing. Mr. Hutchinson also proposed more guidance and encouragement for MAS type buying and piggy-back purchasing. Paul Dauer noted California practices which he considers abusive to small business and recommended the need for Code language to provide safeguards against such practices. Ms. McConnell noted that each state has its own MAS-like processes in which they compete and then list approved vendors. Mr. Miller noted that the problems in California result because that state follows the federal model more closely than other states, and this is not the result of deficiency in the MPC. Mr. Madden announced that the Code articles under discussion were approved by consensus and the concerns expressed with regard to abusive practices should be mentioned in the report.

Accounting, Cost and Pricing Committee. Rob Ryland proposed new definitions for cost or pricing data. It was agreed that the reporters will examine the Committee’s recommendations and take appropriate action, bearing in mind that TINA is not normally applied at the state level. Mike Love indicated the State and Local Government Law Section recommended deletion of all references to cost and pricing data and substitution of "information to substantiate the price". The Committee also recommended deletion of requirements for accounting systems in the case of fixed price contracts. The reporters were requested to consider these issues and add commentary to clarify these points.

Bonding and Insurance Committee. Concerns were expressed regarding risk insurance, and Mr. Miller pointed out where the issue is covered in the draft.

Bid Protest Committee. Identified drafting errors, and they have been or will be corrected.

Mike Love stated that integrated project delivery methods must allow for separate statement of construction price because it is needed for bonding. Mr. Miller agreed and suggested that the language of 5-301 should be sufficient. He also noted that operations bonding is now coming into practice.

Paul Dauer objected to the possibility that letters of credit might be required which could unfairly bring disaster on a business if drawn down before the resolution of a dispute. John Miller noted that when integrated project methods are used, the banks are requiring Letters of Credit to protect against interruption in operations. The new Code language conforms to the current practice in the financial community.

Marshal Doke pointed out that the language on page thirty regarding evaluation factors is based on obsolete federal statutory language, and proposed the following "The RFP shall state…all evaluation factors and subfactors that will be separately rated and the weights to be given to them in the evaluation." Amendment passed.

Marshall Doke also proposed to amend the text on p. 32 to add "(7) add requirement that the proposal must be responsive to the solicitation." The amendment was approved by consensus and accepted by the Reporters.

Paul Dauer reiterated the need for protest processes and Norm Thorpe suggested the report should also note that the United States has undertaken a treaty obligation in the North American Free Trade Agreement that state and local procurement processes will allow for an adequate protest procedure.

Mr. Madden announced that the Model Procurement Code had been approved by the Council, with the modifications noted, and thanked all the participants for their hard work on this project of major importance to the Section, to the profession and to the local jurisdictions which need it. The Chair thanked Mr. Madden and Mr. Othmer for their effective facilitation of Council consideration of very difficult and important issues, and praised the Reporters, the Section council, and all Section participants for completing this important effort on schedule.

There being no further business, the meeting was adjourned at 2:50 PM.

Norman Thorpe

Secretary