A study of the laws on public procurement in Virginia was authorized by Senate Joint Resolution 148, adopted at the 1979 Session of the General Assembly. That resolution directed the Secretary of Administration and Finance to establish a Task Force which would consider and report to the Committees on General Laws of the Senate and House of Delegates on the desirability or feasibility of public contract legislation applying uniformly to the State and cities, counties, and other political subdivisions. It would evaluate current and proposed procurement legislation in light of requirements for the handling of federal grants. It would compare the Virginia law with legislation adopted in other states and with the Model Procurement Code approved by the American Bar Association. The resolution required an Interim Report by December 1, 1979 (*1), and a Final Report by November 1, 1980.

Across the nation, much attention has been devoted during the last decade to the adequacy of the statutory structures within which public procurement activities are conducted. In the early 1970's, for example, the federal Commission on Government Procurement published a report which led to the establishment of the Office of Federal Procurement Policy. In 1975, the Council of State Governments published a lengthy study of State and local government procurement. Shortly thereafter, the American Bar Association, with funding from the Law Enforcement Assistance Administration, undertook the development of a Model Procurement Code, a model state statute encompassing both State and local government procurement. The American Bar Association's House of Delegates approved the Model Procurement Code early in 1979. The federal government has also announced that the procurement systems of recipients of federal grants would have to meet certain standards. The final version of these standards was published in August, 1979, as Attachment O to OMS Circular A-102.

Thus, in embarking on this study, Virginia is participating in a national development, rather than reacting to allegations of deficiencies in public contracting in the Division of Purchases and Supply, the Department of Highways and Transportation, or local governments. This study is more comprehensive, for it involves not a review of the procedures and policies of individual agencies, but an examination of the statutes under which all public agencies purchase materials, services, and construction.

Throughout this report, "procurement" means buying, purchasing, renting, leasing, or otherwise acquiring any supplies, services, insurance or construction from private sources. It also includes all functions that pertain to the obtaining of any supply, service, or construction, including description of requirements, selection and solicitation of sources, preparation and award of contract, and all phases of contract administration.

The Interim Report summarized how Virginia's Senate Document 18 (1980) procurement laws compared with statutes in Georgia, North Carolina, Pennsylvania, Tennessee and Texas, as well as with the Model Procurement Code published by the American Bar Association and Attachment O to OMB Circular A-102, which contains the procurement requirements for any expenditure involving federal contract or grant funds. This led to the identification of a number of areas in which the present Virginia statutes are deficient.

Virginia procurement statutes are scattered throughout the Code, frequently intertwining organizational details with operational policies. This makes it difficult to locate the applicable laws. There is no uniform, coherent statement of the public policies pertaining to procurement activities. This has led to conflicting interpretations. For example, there are Opinions of the Attorney General holding that localities are not required to utilize competitive bidding on construction projects (*2), but there are also Opinions reaching the opposite conclusion (*3). Some provisions are confusing. For example, Section 11-17 applies to contracts "for the construction, improvement or repair" of structures, yet excepts various contracts which seem to have no connection with the construction, improvement or repair of structures, such as contracts for the purchase of hay or grain. Many provisions on the same topic are inconsistent. For example, payment and performance bonds are required on local government construction contracts exceeding $25,000 (if awarded by competitive bidding) (*4), but are required on State construction contracts over $10,000 (*5), except highway construction contracts where the applicable statute requires a performance bond regardless of the amount of the contract, but makes no mention of a payment bond. (*6)

There are serious omissions in Virginia's procurement laws. The purchase of goods by the State and by counties is covered in the Code and by the charters for most cities, but there is no statute covering the purchasing of either goods or construction by school divisions. Where State funds are not involved, contracts for construction may apparently be awarded by school boards without competitive bidding or any other form of competitive procurement. (*7) The procurement of both insurance and most services is not covered by statute at all for any governmental bodies. Virginia statutes invariably mention only one method of procurement, competitive bidding, offer differing incomplete definitions of that (*8), and furnish no guidance on any method to be used if competitive bidding is not practicable.

The Advisory Committee concluded that Virginia's procurement laws should be overhauled, and that the final product should be a comprehensive statement applicable to all levels and agencies of government, articulating broad fundamental operating policies, the foremost of which is competition. The statutory scheme should be flexible to accommodate the variety of agencies and political subdivisions. It should be, and must be perceived to be. fair to vendors and to the public bodies.

The recommended legislation is attached. It includes commentary following many of the sections to explain the purpose, intent, or background of the particular provision. The Advisory Committee urges that if the General Assembly sees fit to adopt this bill, this commentary be included in the annotated Code as was done for the Uniform Commercial Code, the Administrative Process Act, and Title 8.01.

The balance of this report is a discussion of major topics considered by the Advisory Committee. In addition to the recommended legislation, a table of existing statutes and their disposition, a comparison of the recommended legislation with what the federal General Accounting Office considers proper features of public procurement, and summaries of Virginia cases and Opinions of the Attorney General dealing with public contracting are also attached.
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(*1) Senate Document 18 (1980)
(*2) See Reports of Attorney General, 1950-51 at p. 35; 1951-52 at p. 142.
(*3) See Report of Attorney General 1975-76 at p. 72; Opinion to the Honorable Vincent F. Callahan, Jr., dated March 25, 1980.
(*4) Section 11-23 of the Code.
(*5) Section 11-20 of the Code.
(*6) Section 33.1-187 of the Code.
(*7) See Report of the Attorney General, 1977-78 at p. 90. Many school divisions do utilize competitive bidding as a matter of policy, even in the absence of a statutory mandate.
(*8) For example, Section 11-17 requires advertising for ten days. Section 33.1-185 requires advertising for fourteen days. Section 15.1-108 requires advertising for five days, but Section 2.1-442 does not require advertising at all.