Best Practices When Contracting With State & Local Government

1. Best Practices When Contracting With State & Local Government United Partners for Human Services The 15th Annual Conference for Excellence in Nonprofit Management & Leadership May 14, 2014 Karen D. Walker Executive Partner Holland & Knight LLP 315 S. Calhoun Street, Suite 600 Tallahassee, Florida 32301 (850) 425-5612 karen.walker@hklaw.com

2. Bidding on Government Contracts

3. Procurement Types of Competitive Solicitations: • Invitation to Bid • Request for Proposals • Invitation to Negotiate

4. Procurement Purchases That Do Not Require Competition: • Sole source purchase • Exempt purchase • Purchase below specified dollar threshold ($35,000 for state contracts) • Emergency purchase

5. Procurement Tips for Bidders: • Highlight the mandatory requirements of the solicitation and make sure you meet all such requirements (pay attention to use of "shall" or "must"). • Review the solicitation document (and any addenda) immediately upon receipt. For state procurements (and some local government procurements) you have a 72 hour window to protest any specifications that you cannot live with or your rights are waived. • Use the question and answer process to seek clarification regarding any aspect of the solicitation that you do not understand.

6. Procurement Tips for Bidders (continued): • Do not take exception to the specifications or include conditions or assumptions in your proposal, unless authorized by the specifications. • Fully disclose all information required by the specifications. • Monitor postings relating to the procurement. For state procurements (and some local governments) you only have 72 hours to file a notice of intent to protest any contract award or you waive your rights.

7. Ethical Considerations • Cone of Silence • Procurement Lobbying Registration and Reporting – § 112.3215, Fla. Stat. • Expenditure Prohibitions and Gift Law, §§ 112.3148, 112.3215, Fla. Stat.

8. Contract Negotiations Unique Provisions in Florida Government Contracts • No indemnification by the public agency.  • Requirement that bills for fees or other compensation for services or expenses be submitted in detail sufficient for a proper preaudit and postaudit. § 287.058, Fla. Stat. • Requirement that bills for any travel expenses must be submitted in accordance with Section 112.061, Florida Statutes. § 287.058, Fla. Stat.

9. Contract Negotiations • A provision allowing unilateral cancellation by the agency for refusal by the contractor to allow public access to all documents, papers, letters, or other material made or received by the contractor in conjunction with the contract, unless the records are exempt from s. 24(a) of Art. I of the State Constitution and Section 119.07, Florida Statutes. § 287.058, Fla. Stat. • A provision dividing the contract into units of deliverables that must be received and accepted in writing by the contract manager prior to payment. § 287.058, Fla. Stat. • A provision specifying the financial consequences the agency must apply if the contractor fails to perform in accordance with the contract. § 287.058, Fla. Stat.

10. Contract Negotiations • Termination for non-appropriation. § 287.0582, Fla. Stat. ("The State of Florida's performance and obligation to pay under this contract is contingent upon an annual appropriation by the Legislature.") • Audit rights. • Intellectual property ownership. • Sponsorship - § 286.25, Fla. Stat.

11. Contract Negotiations Considerations for Nonprofits in Contract Negotiations:  • You can ask for changes in negotiations. A contract requires agreement of both parties. • Make the contract as specific as possible, especially with respect to deliverables and reports. • Avoid language that gives the agency or contract manager unbridled discretion when approving or disapproving deliverables for payment. • Although financial penalties for non-performance are required to be specified, that does not necessarily mean that the contractor must agree to liquidated damages.

12. Government Contract Performance

13. Subcontracting Selection of Subcontractors • Conduct due diligence on prospective subcontractors. • Most state and local governmental agencies must approve subcontractors.

14. Subcontracting Development of the Subcontract Document • Most state and local government contracts require certain provisions to flow down to subcontractors. These usually include things like record keeping and audit requirements. • In developing subcontracts, all provisions required by the prime contract to apply to subcontractors must be included in the subcontracts. • Subcontracts should also be developed to include other standard provisions designed to protect the prime contractor such as indemnification, insurance requirements, intellectual property rights, and audit rights. • Give the prime contractor the right to terminate the subcontract without cause, if at all possible.

15. Subcontractor Performance • Remember that the prime contractor is responsible to the public agency for the work of the subcontractor. • Regularly monitor subcontractor performance. • Flow through financial penalty provisions to subcontractors so that you can look to a subcontractor for relief if you are subjected to a financial penalty due to a subcontractor's non-performance.

16. Contract Compliance Increased focus on governmental accountability in contracting in Florida means increased focus on contractor compliance. • Transparency Florida • FACTS (on-line access to government contracts) • State Contract Audits For Florida state contracts that involve state funding or state or federal financial assistance, Florida law now requires such contracts to include a financial penalty provision for non-performance. § 215.971, Fla. Stat.; § 287.058, Fla. Stat.

17. Contract Compliance Default • Rule 60A-1.006 sets forth the procedure by which a contractor may be declared in default by a state agency. • The agency must notify vendor in writing of failure to perform and provide a time certain for correcting the failure. • Unless the contractor corrects its failure to perform within the time provided, or the agency determines on its own that the failure to perform is legally excusable, the agency is required to find the contractor in default.

18. Contract Compliance Default (continued) • Upon finding the contractor in default, the agency is to issue a second notice stating: (a) the reasons the contractor is in default, (2) that the agency will reprocure or has reprocured the commodities or services, and (3) the amount of the reprocurement, if known. • The defaulting contractor is not eligible for award of a contract by the agency unless the agency is reimbursed for all of its reprocurement costs.

19. Contract Compliance Tips for Avoiding Compliance Issues • Keep detailed records of all payments received and expenditures made with contract funds. • Make sure all contract deadlines are met. • Only charge allowable costs to the contract. If federal funds are involved, make sure you comply with applicable federal laws and regulations, including OMB circulars (such as OMB Circular A-122- Cost Principles of Non-Profit Organizations). • Correspondence does not amend a contract, only a signed contract amendment changes the contract terms. • Keep lines of communication open with the public agency.

20. Contract Compliance Considerations Useful for Avoiding Compliance Issues (continued) • Cooperate with audit or monitoring requests that comply with audit or monitoring rights in contract. • Respond promptly to notices of non-performance or other deficiencies and complete any corrective action in a timely manner. • Never spend government contract funds on lobbying. • Submit audits as required under audit language of contract and the Florida Single Audit Act, § 215.97, Fla. Stat.

21. Open Government Issues There are two different types of open government laws in Florida: (1) The Sunshine Law (§ 286.011, Fla. Stat.) - the open meetings law; and (2) The Public Records Act (Chapter 119, Fla. Stat.) - the open records law.

22. Requirements of the Sunshine Law (1) Open Meeting  (2) Reasonable Notice (3) Minutes

23. Requirements of the Public Records Act An agency that has custody of a public record must: (1) permit the record to be inspected and examined by any person desiring to do so at a reasonable time, under reasonable conditions, and under the supervision of the custodian of the records or a designee;  (2) furnish a copy of the record upon payment of a fee (if not prescribed by law, the fee cannot exceed 15 cents per one- sided copy or 20 cents per two-sided copy);

24. Requirements of the Public Records Act (continued) An agency that has custody of a public record must: (3) delete or excise from the records produced only those portions of the records that are subject to an exemption from the Public Records Act; and  (4) state the basis of any exemption applicable to the records requested, including the statutory citation, and if requested, the reasons for the conclusion that the record is exempt.  § 119.07, Fla. Stat.

25. Applicability of Sunshine Law and Public Records Act to Non-Profit Contracting With Government Definition of “agency” in the Public Records Act includes any “private agency, person, partnership, corporation, or business entity acting on behalf of any public agency.” § 119.011(2), Fla. Stat.  Courts and the Florida Attorney General look to applicability of Public Records Act to determine applicability of the Sunshine Law and vice versa. When in doubt, the applicability of both are broadly construed.

26. Applicability of Sunshine Law and Public Records Act to Non-Profit Contracting With Government The fact that a private entity has a contract with a public agency alone does not subject the private entity to the Public Records Act. A private entity can be subject to the Public Records Act if: • It has contracted for services where it steps into the shoes of the public agency to perform what would otherwise be a public function; • It meets the “totality of the factors test” articulated by the Florida Supreme Court; or • The contract language itself makes the private entity subject to the Public Records Act.

27. Applicability of Sunshine Law and Public Records Act to Non-Profit Contracting With Government The factors considered by courts in applying the “totality of the factors” test include (continued): • the extent of a public agency’s involvement with, regulation of, or control over the private entity; • whether the private entity was created by the public agency; • whether the public agency has a substantial financial interest in the private entity; and • for whose benefit the private entity is functioning. News & Sun-Sentinel Co. v. Schwab, Twitty & Hanser Architectural Group, Inc., 596 So. 2d 1029, 1031 (Fla. 1992).

28. Public Records Requirements for Services Contracts: HB 1309 (2013) - Now Codified at Section 119.0701, Fla. Stat. Each services contract entered into by any state or local governmental agency with a contractor who is acting on behalf of the agency as provided in Section 119.011(2), Florida Statutes, must include provisions that require the contractor to: • Keep and maintain records as required by the public agency. • Provide the public with access to public records on the same terms and conditions as the public agency.

29. Public Records Requirements for Services Contracts: HB 1309 (2013) - Now Codified at Section 119.0701, Fla. Stat. (continued) • Ensure that confidential and exempt records are not disclosed except as authorized by law.  • Meet all requirements for retaining public records and transfer, at no cost, to the agency all public records in the possession of the contractor upon termination of the contract. Electronically stored records must be provided in a format compatible with the IT systems of the public agency. 

30. Questions