Consulting Services in IT Procurements - 1008

Occasionally, the state contracts with consultants to assist in the preparation of feasibility studies and/or to make recommendations for the acquisition IT goods and/or services. It is the state’s intention that such consultant assistance and all ensuing recommendations be based on objective, unbiased analyses of the relevant facts.

Public Contract Code, Section 10365.5 states, "No person, firm, or subsidiary thereof who has been awarded a consulting services contract may submit a bid for, nor be awarded a contract for, the provision of services, procurement of goods or supplies, or any other related action which is required, suggested, or otherwise deemed appropriate in the end product of the consulting services contract." SCM Vol. 1, defines the term "consulting services" with respect to state contracts.

The requirements of Public Contract Code, Section 10365.5 and this section are applicable to any IT contract that includes a consulting component as articulated in Public Contract Code, Section 10430 (b)(1).

All IT solicitation documents that include a consulting component must include language to address this requirement. Amendments to contracts that incorporate a consulting component that was not part of the original solicitation document must also contain this language. The actual language should be reproduced and included in the solicitation document.

In addition, should a consultant establish or become aware of such a financial interest during the course of contract performance, the consultant must inform the state in writing within ten (10) working days. If, in the state’s judgment, the newly-established financial interest will jeopardize the objectivity of the recommendations, the state shall have the option of terminating the contract.

Failure to disclose a relevant financial interest on the part of a consultant will be deemed grounds for termination of the contract with all associated costs to be borne by the consultant and, in addition, the consultant may be excluded from participating in the state's bid processes for a period of up to thirty-six (36) months in accordance with Public Contract Code, Section 12102.2(i).

No consultant shall be paid out of state funds for developing recommendations on the acquisition of IT goods or services or assisting in the preparation of a feasibility study, if that consultant is to be a source of such acquisition or would otherwise directly and/or materially benefit from the state adoption of such recommendations or the course of action recommended in the feasibility study. Further, no consultant shall be paid out of state funds for developing recommendations on the disposal of state surplus IT products if that consultant would directly and/or materially benefit from state adoption of such recommendations.

Before determining to either reject a potential bidder or withhold an award of a contract a state department should analyze the issues considering the information provided in this manual and applicable statutes. Consultation with departmental counsel is strongly recommended. Further advice may be sought when a bidder is participating in a solicitation to provide services or goods under circumstances which might constitute a follow-on (subsequent) contract. The purpose of this advice is to facilitate an early determination to allow suppliers and departments to ascertain eligibility for proposed/pending procurements.

For contracts awarded by DGS, or pursuant to purchasing authority delegated by DGS, or which are subject to the approval of DGS, the Procurement and Contracting Officer of a contracting department or a potentially disqualified bidder may seek advice from the Deputy Director, Procurement Division, within ten (10) business days after a contracting opportunity is advertised or announced to bidders, typically through the issuance of an RFI or RFP, whichever occurs first. DGS may, in its discretion, consider requests made after the expiration of the time period. For its part, DGS will make every effort to provide an expeditious response. If the inquiry is from the contracting department, that department shall reimburse DGS for any costs associated for such review.

The request for advice should be submitted to:
Deputy Director
Procurement Division
707 Third Street, 2nd Floor
West Sacramento, CA 95605
FAX: (916) 375-4505

Any documents submitted for review and any written advice of DGS shall be subject to the Public Records Act (Government Code, Section 6250 et seq.) and applicable exemptions thereto.

The advice provided will be considered informal and not an official determination by DGS. The provision of this informal advice shall not constrain any subsequent determination under law, nor will DGS be restricted from the full exercise of its contract review responsibilities, including further review of issues related to Public Contract Code, Section 10365.5 based on factors discovered by DGS subsequent to the initial determination.

Departments must document the procurement file with known suppliers that may not compete. In the event that no official consistent determination is made regarding a supplier’s ability to compete, departments must contact DGS/PAMS for advice regarding consistent application of the policy.

Proposals in response to state procurements for assistance in the preparation of feasibility studies or the development of recommendations for the acquisition of IT goods and/or services must disclose any financial interests (i.e., service contracts, OEM agreements, remarketing agreements, etc.) that may foreseeably allow the individual or organization submitting the proposal to materially benefit from the state’s adoption of a course of action recommended in the feasibility study or of the acquisition recommendations.