Monday, June 18, 2007

The Prequalification Nightmare

Prequalification is generally a means by which a municipality (whether directly or through one of its agencies) screens potential vendors in advance to determine their suitability to bid on municipal contracts. In that regard, contractors are typically provided with a questionnaire (which must be executed under oath) seeking information, among other things, about their business background, financial status, prior work experience, prior or existing violations of law, and whether the contractor has been terminated from other projects. The theoretical underpinning of the procurement process is generally to protect the public by ensuring that parties contracting with a muncipality are ethical. If certain criteria are met, the contractor is placed on the list of prequalified vendors. Depending on the municipality, prequalified lists are typically reviewed at least once annually to ensure that firms which no longer meet prequalification standards are removed from the list.

Usually, trouble rears its ugly head when the vendor, mistakenly, negligently or intentionally, fails to provide complete and/or accurate information as requested. If a rational basis exists, the failure or refusal to furnish such information could result in removal from the prequalification list, a determination by the municipality that the contractor is a non-responsive bidder and, ultimately, the contractor’s inability to be awarded public work in that municipality. In my experience, even a good faith, de minimis mistake in failing to disclose required information may result in removal from the prequalification list and permanent prejudice to the contractor.

Of course, contractors complain to no end about the unfairness of such an outcome; however, given the intent of public procurement laws and regulations, it is an outcome that might be avoided by reading and completing prequalification questionnaires very, VERY carefully.

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