CHAPTER 438

FORMERLY

SENATE BILL NO. 415

AS AMENDED BY SENATE AMENDMENT NO. 1

AN ACT TO AMEND TITLE 29 OF THE DELAWARE CODE RELATING TO BIDDER PREQUALIFICATION REQUIREMENTS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

Section 1. Amend Section 6902, Title 29, Delaware Code by adding a new subsection (21) to read as follows:

“(21) Z score means a calculation used to assess a bidder’s fiscal health. The calculation is based on the following weighted ratios: return on total assets, sales to total assets, equity to debt, working capital to total assets and retained earnings to total assets.”

Section 2. Amend Section 6962(c), Title 29 of the Delaware Code by deleting subsections (1) through (4) in their entirety and inserting the following in lieu thereof:

"(1) The Department shall establish a two-step process for the prequalification of contractors and subcontractors that desire to bid on large public works contracts for which prequalification is specified by the contracting agency. A contractor shall not be permitted to bid on a contract that requires prequalification unless the contractor has been prequalified pursuant to this subsection. A prequalified and classified contractor shall not be permitted to submit a bid on a specific contract unless the contractor completes a questionnaire and submits supplemental information at the option of the contracting agency or per sub-paragraph (c)(10)(a) of this section to the Department pertaining to that contract. The supplemental request for information shall not include any information requested during the first step of the prequalification process, but may require the contractor to affirm that no material changes have occurred since the application for the first step of the prequalification process was submitted to the Department. The prequalification process shall apply to general contractors and subcontractors in the areas that are deemed necessary by the Department.

(2) The prequalification classification issued by the Department, as part one of the prequalification process, shall be valid for 12 months. A contractor or subcontractor subject to prequalification shall request to be reclassified by the Department after the 12-month period in order to remain eligible to bid on public works contracts that require prequalification. A contractor or subcontractor who holds a valid prequalification classification shall report any material changes which could adversely affect the prequalification, as established in paragraph (c)(3) of this section, to the Department in writing within 10 days of the material change. A contractor or subcontractor may report, to the Department in writing, material changes which could positively affect the prequalification, as established in paragraph (c)(3) of this section. Based on the information provided, the Department may change the classification or revoke prequalification at the sole discretion of the Secretary.

(3) The prequalification process shall include a requirement that the contractor or subcontractor submit a statement under oath on a form designated by the Department. The form shall fully describe and establish the financial ability, responsibility, plant and equipment, organization, ownership, relationships and prior experience of the contractor or subcontractor and any other pertinent and material facts as may be deemed necessary by the Department. At the discretion of the Department, the submission shall include part or all of the following:

a. The most recent audited financial statement and/or financial statement review containing a complete statement of the proposing contractor’s or subcontractor’s financial status. Such statement shall include the contractor’s Z score;

b. The proposing contractor’s or subcontractor’s experience on other public works or private sector projects, including but not limited to, the size, complexity and scope of the firm’s prior projects;

c. Performance reviews of the proposing contractor or subcontractor on previously awarded public works or private sector construction projects within the last 10 years;

d. Civil judgments and/or criminal history of the proposing contractor’s or subcontractor’s principals;

e. Any debarment or suspension by any government agency;

f. Any revocation or suspension of a license;

g. Any bankruptcy filings or proceedings; and

h. A statement as to organization, which shall demonstrate the adequacy of such organization to undertake a public works contract. This statement shall include the resumes of the management and professional staff.

(4) After the receipt of the submission provided for in paragraph (3) of this sub-section, the Department may verify all information provided in the contractor’s or subcontractor’s submission, including applicable license and certificate requirements, federal or state debarments and violations of law. The Department may also conduct inquiries or surveys of the contractor’s or subcontractor’s prior customers.

(5) Based upon the submission provided for in paragraphs (3) and (4) of this sub-section, the Department Review Committee, which shall include at least two Department employees, shall assign a contractor or subcontractor the following classification(s) and limits for the purpose of determining the types of projects for which a contractor or subcontractor is entitled to bid:

(a) a trade(s) or work classification(s); and

(b) the maximum contract dollar value for which the contractor or subcontractor may submit a bid.

To effectuate these requirements of the prequalification process, the Department shall develop rules and regulations for assigning classifications and maximum dollar limits.

(6) The classification shall be made, or prequalification may be denied, and notice thereof shall be sent to the contractor or subcontractor within 5 days of the determination made pursuant to paragraph (c)(5) by registered or certified mail or other legally valid methods. Notice of prequalification classification or denial shall also be sent to the contracting agency if said agency is not the Department.

(a) Based upon the proposing contractor’s or subcontractor’s answers to the step-one or step-two prequalification questionnaire, the Department may deny prequalification for any one of the following specified reasons:

(i) Insufficient financial ability to perform a public works contract;

(ii) Inadequate experience to undertake a public works contract;

(iii) Documented failure to perform on prior public or private construction contracts, including but not limited to, final adjudication or admission of violations of prevailing wage laws in Delaware or any other state;

(iv) Prior judgements for breach of contract that indicate the proposing contractor or subcontractor may not be capable of performing the work or completing a large public works contract;

(v) Criminal convictions for fraud, misrepresentation or theft relating to contract procurement;

(vi) Previous debarment or suspension of the contractor or subcontractor by any government agency that indicate the proposing contractor or subcontractor may not be capable of performing the work or completing a large public works contract;

(vii) Previous revocation or suspension of a license that indicate the proposing contractor or subcontractor may not be capable of performing the work or completing a public works contract;

(viii) Previous bankruptcy proceedings that indicate the proposing contractor or subcontractor may not be capable of performing the work or completing a public works contract; or

(7) Failure to provide accurate pre-qualification information on past or current prequalification questionnaires. Reason(s) for the denial of prequalification shall be in writing, and shall be sent to the contractor or subcontractor within five working days of such decision. An agency may refuse to provide any contractor or subcontractor disqualified under this sections plans and specifications for a contract. An agency receiving a bid from a contractor or subcontractor disqualified under this subsection shall not consider such bid.

(8) Any contractor or subcontractor disqualified pursuant to paragraph (c)(6) of this section may request a review of such decisions with the Secretary within five working days of the receipt of the agency’s notification of the prequalification decision. Such request shall be made in writing. No action in law or equity shall lie against any agency or its employees if the contractor or subcontractor does not first review the decision with the Secretary. To the extent the contractor or subcontractor brings an action challenging a decision pursuant to the paragraph (c)(6) of this section after such review by the Secretary, the court shall afford great weight to the decision of the Department head, and shall not overturn such decision unless the contractor or subcontractor proves by clear and convincing evidence that such decision was arbitrary and capricious.

(9) The Department shall maintain a registry of all contractors and subcontractors prequalified to bid on public works projects. The registry shall include the classification(s) of the contractor or subcontractor and the maximum contract dollar value for which the contractor or subcontractor may submit a bid.

(10) (a) In addition to the prequalification required herein, any agency shall require a contractor or subcontractor to provide supplemental information that is specifically relevant to the public works contract to be bid. Such additional information shall be considered supplemental certification, and shall not duplicate, in any way, the information required by the Department in its prequalification process except for labor supply available to complete the project in a timely manner. Based upon the proposing contractor’s or subcontractor's answers to the agency's supplemental prequalification questionnaire, the Secretary, or in the case of school projects, the school district may deny the prequalification for any one of the following specified reasons:

(i) Inadequate experience to undertake the specific project that requires supplemental prequalification;

(ii) Inadequate expertise to undertake the specific project that requires supplemental prequalification;

(iii) Failure to provide supplemental prequalification information for the specific project that requires supplemental prequalification;

(iv) Inadequate labor supply available to complete the project in a timely manner.

(c) Denial of supplemental prequalification by the Department, or in the case of school projects, the school district shall be in writing no later than two weeks before the close of the project bid, and shall be sent to the contractor or subcontractor within five working days of such decision. An agency may refuse to provide any contractor or subcontractor disqualified under this subsection, plans and specifications for the contract. An agency receiving a bid from a contractor or subcontractor disqualified under this subsection shall not consider such bid.

(d) Any contractor or subcontractor disqualified pursuant to subsection (c)(10) of this section may request, in writing within five working days of the receipt of the Department’s, or in the case of school projects, the school district supplemental prequalification, a review of such decisions with the Secretary or the Secretary’s designee, or in the case of school projects, the school district. No action in law or equity shall lie against any agency or its employees if the contractor or subcontractor does not first review the decision with the Secretary, or in the case of school projects, the school district within five working days after the decision is rendered by the Department, or in the case of school projects, the school district. To the extent the contractor or subcontractor brings an action challenging a decision pursuant to the subsections (c)(10) of this section after such review by the Secretary, or in the case of school projects, the school district, the court shall afford great weight to the decision of the Secretary, or in the case of school projects, the school district and shall not overturn such decision unless the contractor or subcontractor proves by clear and convincing evidence that such decision was 'arbitrary and capricious.'"

Section 3. Any county government in the State of Delaware may use the process and the prequalification lists described herein for county public works projects .

Section 4. This Act shall apply to all public works contracts signed after March 31, 2003 or for projects for which the agency initially distributes or disseminates any plans, including bid plans and construction plans, specifications or contract documents to a contractor or subcontractor after December 31, 2002.

Approved October 30, 2002