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Balfour Beatty Construction v. Maryland Department of General Services

Court of Special Appeals of Maryland

December 2, 2014

BALFOUR BEATTY CONSTRUCTION, et al.
v.
MARYLAND DEPARTMENT OF GENERAL SERVICES, et al.

Woodward, Wright, Leahy, JJ. [*]

OPINION

LEAHY, J.

The State of Maryland considers a litany of factors when determining which company's proposal it will select for the completion of a prominent State construction project. Unlike the selection of a contractor in the private sector, the process for the State is governed by the Maryland Administrative Procedure Act and Maryland procurement law. The question in this case concerns whether the State properly concluded that (1) it could consider a novel specification without triggering the Maryland APA's rulemaking process and (2) the specification encourages "maximum practicable competition" under Maryland procurement law.

In late 2011, the State of Maryland issued a request for proposals ("RFP") for Construction Management at Risk Services for a new detention facility to replace the rundown and unsafe buildings that house male juvenile offenders at the Cheltenham Youth Facility in Prince George's County (the "Project"). Prior to the submission of proposals, Balfour Beatty Construction, Coakley & Williams Construction, Hensel Phelps Construction, and Manhattan Construction ("Protestors") jointly filed a pre-award protest with the Maryland Department of General Services ("DGS" or "Agency"). Protestors challenged the State's inclusion of a Project Labor Agreement ("PLA") as one of the factors used to evaluate technical proposals. DGS responded by amending the RFP to clarify that inclusion of a PLA was not mandatory and extended the date for submission of proposals.

The procurement officer denied the protest, and Protestors appealed to the Maryland State Board of Contract Appeals ("MSBCA" or "Board"), where the Agency's decision was ultimately affirmed. Protestors filed a Petition for Review in the Circuit Court for Baltimore City. The matter comes before this Court from the circuit court's June 19, 2013 order affirming the MSBCA's determinations.

Balfour Beatty Construction, Coakley & Williams Construction, and Manhattan Construction ("Appellants")[1] present two questions on appeal, which we have rephrased:

I. Did the MSBCA err in failing to find that inclusion of a PLA as a factor in ranking proposals establishes a procurement preference for organized labor and constitutes an unprecedented change in state policy mandating formal rulemaking under the Maryland Administrative Procedure Act?
II. Did the MSBCA err in failing to set aside the challenged RFP because it discriminates in favor of offerors who commit to adopt a PLA, thereby restricting competition in violation of Maryland procurement law?

For the reasons set forth below, we hold that a novel specification included in a single RFP, without more, does not change existing procurement law or formulate a new policy of widespread application or future effect and, therefore, does not mandate predicate rulemaking under the Maryland Administrative Procedure Act ("Maryland APA"). We also find that the record before the MSBCA contained substantial evidence to support its decision that the PLA specification was reasonably related to the needs of the State while encouraging the maximum practicable competition.

I. Cheltenham Youth Detention Center Project

The Cheltenham Youth Facility is operated by the Maryland Department of Juvenile Services and is located on approximately 900 acres in southern Prince George's County, Maryland, near U.S. Highway 301. First opened in 1870 as a school for boys, Cheltenham has served as the primary detention facility for male delinquent youths from many parts of the State. As stated in the Agency Report filed by DGS, [2] the purpose of the facility today is to house and educate delinquent male youths between the ages of 12 and 18 years who are considered too dangerous to return to their homes and who are awaiting court disposition or trial in Anne Arundel, Prince George's, Calvert, Charles and St. Mary's Counties.

By all accounts, the residential cottages located on the Cheltenham campus are outdated, inefficient, and unsafe. Other administrative buildings are in various stages of deterioration. The Project centers on replacing deteriorated buildings on the campus with a 72-bed state-of-the-art detention facility and a regional warehouse. When complete, the new detention center, designed to combine the functions of the existing campus buildings into one facility, will be the first of its kind in Maryland. The proposed 99, 000 gross square foot facility—with space for housing, administration, admissions and release, somatic and behavioral health, food service, education, recreation, visitation, staff training, storage and maintenance—will be significantly larger and more complex than facilities ordinarily built by DGS.

Plans for the Project began in 2005 following a determination by the Department of Juvenile Services that the current facilities were obsolete.[3] The Project went through several design changes and finally appeared in its current form in the Governor's 2011 capital improvement plan for fiscal years ("FY") 2012-2016. In 2011, the Project was estimated at approximately $48 million and was expected to take longer than three years to complete. Phase I of the Project (pre-construction/design phase) was expected to run about 14 months, and Phase II (construction phase) was anticipated to take about 24 months to complete.

During 2011, DGS officials explored the use of PLAs for Juvenile Justice facilities generally and on the Cheltenham Project specifically. A PLA is a negotiated pre-hire agreement between a construction manager (here, the CM at Risk), and a designated collective-bargaining representative for all employees on a particular project. 51 C.J.S. Labor Relations § 311 (2014). In order to perform work on a project covered by a PLA, a contractor must sign the PLA and agree that no labor strikes or disputes will disrupt the project. Id.[4] Typically, PLAs covering public works projects require that bidders are or become bound by the PLA but do not restrict bidding to union contractors or limit work to union members.[5]

In a letter dated October 18, 2011, the Maryland Secretary of State wrote to the Vice President of the Laborer's International Union of North America, stating that the State was "allowing various stakeholders an opportunity to comment on the final draft of the proposed criteria for a [PLA] relating to the Cheltenham [Project]." He explained that, with respect to whether the State would institute a policy encouraging use of PLAs on projects over $25 million, "we are going to evaluate our experience with this upcoming procurement and then decide how we may want to proceed on future procurements."

RFP for Construction Management at Risk Services

On November 9, 2011, DGS issued an RFP for Construction Management at Risk Services for the Cheltenham Project, designated No. DC-455-090-001 ("Cheltenham RFP"), pursuant to Maryland Code (1988, 2009 Repl. Vol.), State Finance and Procurement Article ("SFP"), §13-103 and Code of Maryland Regulations ("COMAR") 21.05.03 (Competitive Sealed Proposals).[6] DGS determined that the Construction Management at Risk ("CM at Risk") delivery method was best suited to deal with the magnitude and complexity of the Project.[7] Authorized under COMAR, the CM at Risk is defined as:

[A] project delivery method wherein a construction manager provides a range of preconstruction services and construction management services which may include, but are not limited to, cost estimation and consultation regarding the design of the project, prequalifying and evaluating trade contractors and subcontractors, awarding the trade contracts and subcontracts, scheduling, cost control, and value engineering.

COMAR 21.05.10.01B(1). Typically, the CM assumes all risks for cost, scheduling, and performance of trade contracts.

The Cheltenham RFP prescribes CM at Risk services during both pre-construction and construction phases of the Project and requires that, "[i]n order to be considered, all firms must agree [] to the Guaranteed Maximum Price ("GMP") of Forty-Eight Million, Three Hundred Nine Thousand Dollars ($48, 309, 000.00)." (Cheltenham RFP, Section 00300, Article 2(C)(1)). The CM serves as a cost estimator and project coordinator during the design phase and as the general contractor during construction. The CM's responsibilities include developing schedules, preparing construction cost models and estimates, conducting value engineering and labor conditions studies, managing change order review and quality assurance inspections, and advising on the sequencing of the construction work. The "Project Team" comprises the State of Maryland, the CM, the Architects/ Engineer(s), and other project consultants. (Cheltenham RFP, Section 00400, Article 1(A)(5)).

Section 00300, Article 2, establishes the scope of the Project and identifies the factors for DGS to consider when evaluating the proposals:

B. Evaluation Factors for Award

1. Basis for Award

The Procurement Officer shall make a determination recommending award of the contract to the responsible offeror whose proposal is determined to be the most advantageous to the State, considering price and the evaluation factors set forth in the request for proposals.

2. Technical Proposal Evaluation

The following technical factors shall be used by the Evaluation Committee to evaluate technical proposals. The factors are listed in descending order of importance.
[Technical Evaluation Factors
a. Experience of Firm
b. Management Approach
c. Key Personnel
d. Past Performance of Firm
e. Labor/Trade Apprenticeship and Training Program
f. Project Labor Agreement (include previous experience with PLA projects)[8]
g. Economic Benefits to the State

3. Price

All offers must include reasonable prices. The Procurement Officer may reject offers containing prices determined to be unreasonably high or low.

4. Minority Business Enterprise Participation Goal

The PLA cannot be a basis for waiver of MBE participation goals required by this solicitation.

(Emphasis added).

Subsection D, entitled "Technical Proposal Requirements, " includes detailed instructions regarding the requirements for each of the technical evaluation factors listed in Article 2, subsection B (2). Although subsequently amended, Subsection D.6 entitled "Project Labor Agreement" originally provided:[9]

a. The firm shall provide at least two (2) examples of projects which they have managed where a Project Labor Agreement (PLA) was used and briefly describe their experience in developing and working with the PLA
b. The firm shall provide a statement affirming their intent to establish and use a PLA in accordance with Section 00840 of this RFP.

The CM is required to negotiate any PLA in good faith with all relevant labor organizations that have jurisdiction over the trades involved in construction of the Project. Qualifying PLAs must contain a provision that the contractor and all subcontractors are able to compete for contracts without regard to their participation in any other collective bargaining agreements. PLAs must guarantee against strikes, lockouts, and similar job disruptions; and include provisions that set forth effective, prompt, and mutually binding procedures for resolving labor disputes.

November 21, 2011 Pre-Proposal Conference[10]

On November 21, 2011, procurement officer Myrna L. Harris presided over the pre-proposal conference for the Project. Representatives from a number of firms attended, including Turner Construction Company, Inc., Skanska USA Building, Inc., Hunt Construction Group, Inc., Gilbane, Inc., and The Whiting-Turner Contracting Company, Inc.

At the conference, Ms. Harris explained the RFP process, reiterating that any changes to the RFP would be provided by addenda and that offerors should acknowledge the receipt of such addenda in their technical proposals. She also discussed the submittal process, including that offerors are to submit a two-part proposal consisting of 1) a technical proposal, and 2) a price proposal. She noted that the RFP provides that technical and price proposals are given equal weight, and that the technical evaluation criteria is listed in order of importance. Mr. Stephen Gilliss, DGS Project Manager, briefly described the scope of the Project and clarified that, among other things, Phase I of the Project was not part of the GMP. The meeting was then opened for questions, and attendees ...


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