Plain Text Law

Title 21 — Subtitle 06. Contract Formation and Award

Chapter 01. Qualification and Duties

Regulation .01 Responsible and Responsive.Copy Citation

A.
If a procurement officer determines that a person is not a responsible bidder or offeror, or that the bid is nonresponsive, the procurement officer shall include that determination in the procurement file.
B.
A procurement officer may find that a person is not a responsible bidder or offeror for:
(1)
Unreasonable failure to supply information promptly in connection with a determination of responsibility under this chapter; or
(2)
Any other reason indicating that the person does not have:
(a)
The capability in all respects to perform fully the contract requirements, or
(b)
The integrity and reliability that will assure good faith performance.

Regulation .02 Disclosure of Information.Copy Citation

A.
State Government Article, Title 10, Subtitle 6, shall govern any request for the disclosure of information related to a procurement.
B.
Confidential, proprietary information, and trade secrets furnished by a bidder or offeror under this chapter may be disclosed to another State agency only if there is a demonstrated need for the information and may not be disclosed outside of State government except as provided by State Government Article, Title 10, Subtitle 6, or as provided by this chapter.
C.
Duty Not to Disclose Information.
(1)
After a solicitation for bids under COMAR 21.05.02 or for proposals under COMAR 21.05.03 or 21.12.02 — 21.12.05 is issued and until a procurement officer makes a recommendation for award of the contract, the procurement officer may disclose information only as set forth in COMAR 21.05.01.05.
(2)
Before bid opening:
(a)
Bids shall remain sealed; and
(b)
The procurement officer may not disclose the name of any person who has submitted a bid.
(3)
Before a procurement officer makes a recommendation for award of the contract, a procurement officer may not disclose the name of any person who has submitted a proposal.
(4)
Before awarding a procurement contract based on competitive sealed proposals, a procurement officer may not disclose the contents of a proposal to any person other than a person responsible for evaluating or reviewing the proposal, or approving the contract award, except as permitted by State Finance and Procurement Article, §13-105, Annotated Code of Maryland.
D.
Duty to Disclose Information. Subject to the provisions of State Government Article, Title 10, Subtitle 6:
(1)
A summary of the final evaluation of a proposal shall be open to public inspection;
(2)
After an award, all proposals shall be open to public inspection; and
(3)
At and after bid opening, the contents of a bid and any document submitted with the bid shall be open to public inspection.
E.
Records of Evaluators. A procurement officer may deny public access to the advisory or deliberative records of any evaluator of a proposal if the records would not be available by law to a party in litigation.
F.
Discoverability During Proceedings. The provisions of this chapter do not affect the authority of the Board of Contract Appeals or a court of competent jurisdiction:
(1)
To decide that information is discoverable in an administrative or judicial proceeding; and
(2)
To compel disclosure of that information.

Chapter 02. Cancellation and Rejection of IFBs and RFPs

Regulation .01 Delegation of Authority.Copy Citation

A.
The Board hereby delegates to each Department head authority to approve cancellation of a solicitation or rejection of all bids or proposals for procurements within the Department's jurisdiction.
B.
When a Department acts as a procurement agency, the delegation in §A is not affected unless the Board directs otherwise.
C.
Actions taken by a Department pursuant to the delegation in §A shall be reported to the Board in accordance with COMAR 21.02.01.05B.

Regulation .02 Cancellation of Invitations for Bids or Requests for Proposals.Copy Citation

A.
Notice. Each solicitation issued by a procurement agency shall state that the solicitation may be cancelled as provided in this regulation.
B.
Cancellation Before Opening.
(1)
Before opening of bids or proposals, a solicitation may be cancelled in whole or in part when the procurement agency, with the approval of the appropriate Department head or designee, determines that this action is fiscally advantageous to the State or otherwise in its best interest. Reasons for cancellation include but are not limited to:
(a)
The absence of a continued need for the procurement;
(b)
When proposed amendments to the solicitation would be of such magnitude and substance that a new solicitation is desirable.
(2)
When a solicitation is cancelled before bid or proposal opening, the bids or proposals shall be returned to the vendors submitting them and vendors shall be given notice of the cancellation. The notice of cancellation shall:
(a)
Identify the solicitation;
(b)
Briefly explain the reason for cancellation; and
(c)
If appropriate, explain that opportunity will be given to compete on any resolicitation or any future procurements of a similar nature.
C.
Rejection of All Bids or Proposals.
(1)
After opening of bids or proposals but before award, all bids or proposals may be rejected in whole or in part when the procurement agency, with the approval of the appropriate Department head or designee, determines that this action is fiscally advantageous or otherwise in the State's best interest. Reasons for rejection of all bids or proposals include but are not limited to:
(a)
The absence of a continued need for the procurement;
(b)
The State agency no longer can reasonably expect to fund the procurement;
(c)
Proposed amendments to the solicitation would be of such magnitude that a new solicitation is desirable;
(d)
Prices exceed available funds and it would not be appropriate to adjust quantities to come within available funds;
(e)
There is reason to believe that the bids or proposals may not have been independently arrived at in open competition, may have been collusive, or may have been submitted in bad faith;
(f)
Bids received indicate that the needs of the State agency can be satisfied by a less expensive equivalent item differing from that on which the bids or proposals were invited; or
(g)
All otherwise acceptable bids or proposals received are at unreasonable prices.
(2)
A notice of rejection of all bids or proposals shall be sent to all vendors that submitted bids or proposals, and it shall conform to §B(2).
D.
Documentation. The determination of the reasons for cancellation or rejection of all bids or proposals shall be made a part of the procurement file.

Regulation .03 Rejection of Individual Bids or Proposals.Copy Citation

A.
Notice in Solicitation. Each solicitation issued by a State agency shall provide that any bid or proposal may be rejected in whole or in part when it is in the best interest of the State to do so.
B.
Reasons for Rejection. Reasons for rejection of a bid or proposal include but are not limited to:
(1)
The vendor that submitted the bid or proposal is not responsible as determined under COMAR 21.06.01.01;
(2)
The bid is not responsive or the proposal is not reasonably susceptible of being selected for award;
(3)
The price is unreasonable;
(4)
The bidder or offeror is debarred or otherwise is ineligible for award and the period of debarment or ineligibility has not expired.

Regulation .04 Minor Irregularities in Bids or Proposals.Copy Citation

A.
A minor irregularity is one which is merely a matter of form and not of substance or pertains to some immaterial or inconsequential defect or variation in a bid or proposal from the exact requirement of the solicitation, the correction or waiver of which would not be prejudicial to other bidders or offerors.
B.
The defect or variation in the bid or proposal is immaterial and inconsequential when its significance as to price, quantity, quality, or delivery is trivial or negligible when contrasted with the total cost or scope of the procurement.
C.
The procurement officer shall either give the bidder or offeror an opportunity to cure any deficiency resulting from a minor informality or irregularity in a bid or proposal or waive the deficiency, whichever is to the advantage of the State.

Regulation .05 Disposition of Bids or Proposals.Copy Citation

When bids or proposals are rejected, or a solicitation is cancelled after bids or proposals have been received, the bids or proposals that have been opened shall be retained in the procurement file, and the bids or proposals that have not been opened shall be returned to the bidders or offerors upon request, or otherwise disposed of.

Chapter 03. Types of Contracts and Multi-Year Contracts

Regulation .01 General.Copy Citation

A.
Prohibition. Cost-plus-a-percentage-of-cost contracts and subcontracts are prohibited.
B.
Policy Regarding Selection of Contract Types.
(1)
Subject to the prohibition in §A, any type of contract which shall promote the best interests of the State may be used. However, preference shall be given in the order indicated to the following types of contracts:
(a)
Fixed-price;
(b)
Fixed-price incentive;
(c)
Cost plus incentive fee; and
(d)
Cost-plus fixed fee or cost-reimbursement.
(2)
The objective when selecting a contract type is to obtain the best value in the time required and at the lowest cost or price or greatest revenue to the State. In order to achieve this objective, the procurement officer, before choosing a contract type, should review those elements of the procurement which directly affect the cost, time, risk, and profit incentives bearing on the performance.
(3)
Among the factors to be considered in selecting any type of contract are:
(a)
The type and complexity of the procurement;
(b)
The difficulty of estimating performance costs such as the inability of the State to develop definitive specifications, to identify the risks to the contractor inherent in the nature of the work to be performed, or otherwise to establish clearly the requirements of the contract;
(c)
The administrative costs to both parties;
(d)
The degree to which the State shall provide technical coordination during the performance of the contract;
(e)
The effect of the choice of the type of contract on the amount of competition to be expected;
(f)
The stability of material or commodity market prices or wage levels;
(g)
The urgency of the requirement; and
(h)
The length of contract performance.
(4)
Except for a firm fixed-price contract, no contract type may be used unless the procurement officer determines that the contractor's accounting system will permit timely development of all necessary cost data in the form required by the specific type of contract contemplated and that the contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles and that determination is approved by the appropriate Department.

Regulation .02 Types of Fixed-Price Contracts.Copy Citation

A.
Definitions.
(1)
“Firm fixed-price contract” means a fixed price contract that provides a price that is not subject to adjustment because of variations in the contractor's cost.
(2)
“Fixed-price contract” means a contract which places responsibility on the contractor for the delivery of the product or the complete performance of the services or construction in accordance with the contract terms at a price that may be firm or may be subject to contractually specified adjustments.
(3)
“Fixed-price contract with price adjustment” means a fixed price contract that provides for variation in the contract price under special conditions defined in the contract, other than customary provisions authorizing price adjustments due to modifications.
B.
Application.
(1)
Fixed-Price Contract Generally. A fixed-price contract is appropriate for use when the extent and type of work necessary to meet State requirements can be reasonably specified and the cost can be reasonably estimated, as is generally the case for construction or standard commercial products. A fixed-price type of contract is the only type of contract that can be used in competitive sealed bidding.
(2)
Firm Fixed-Price Contract. A firm fixed-price contract should be used whenever prices which are fair and reasonable to the State can be established at the outset. Bases upon which firm fixed prices may be established include:
(a)
Adequate price competition for the contract;
(b)
Comparison of prices in similar prior procurements in which prices were fair and reasonable;
(c)
Establishment of realistic costs of performance by utilizing available cost or pricing data and identifying uncertainties in contract performance; or
(d)
Use of other adequate means to establish a firm price.
(3)
Fixed-Price Contract with Price Adjustment. When a fixed-price contract with price adjustment is used, the formula or other basis by which the adjustment in contract price can be made shall be specified in the solicitation and the resulting contract. Adjustment allowed may be upward or downward only or both upward and downward. Examples of conditions under which adjustments may be provided in fixed-price contracts are:
(a)
Changes in the contractor's labor agreement rates as applied to the industry or areawide;
(b)
Changes due to rapid and substantial price fluctuations, which can be related to an accepted index;
(c)
In requirements contracts, when a manufacturer's general price change alters the base price (such as a change in a manufacturer's published price list or posted price to which a fixed discount is applied pursuant to the contract to determine the contract price) and that change affects the contractor.

Regulation .03 Types of Cost-Reimbursement Contracts.Copy Citation

A.
Definitions.
(1)
“Cost contract” means a contract which provides for reimbursement for allowable costs but no fee.
(2)
“Cost-plus fixed fee contract” means a contract which provides for reimbursement for allowable costs and in addition a fixed fee.
(3)
“Cost-reimbursement contract” means a cost contract or a cost-plus fixed fee contract.
B.
Application.
(1)
Generally, a cost-reimbursement contract is appropriate when the uncertainties involved in contract performance are of such magnitude that the cost of contract performance cannot be estimated with sufficient certainty to realize economy by use of any type of fixed-price contract. A cost-reimbursement contract necessitates appropriate monitoring by State personnel during performance to give reasonable assurance that objectives are being met.
(2)
Determinations. A cost-reimbursement contract may be used only when the procurement officer determines in writing that:
(a)
This contract is likely to be less costly to the State than any other type or that it is impracticable to otherwise obtain the items of the kind or quality required except under such a contract;
(b)
The proposed contractor's accounting system shall permit timely development of all necessary cost data in the form required by the specific contract type contemplated; and
(c)
The proposed contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles.
(3)
Cost-reimbursement contracts shall provide that costs shall be reimbursed only if they are costs recognized as allowable and allocable under the cost principle regulations in Subtitle 09, or in the contract.
C.
Each contractor under a cost-reimbursement type contract shall give notice and secure approval, as required by the contract, before entering into:
(1)
A cost-reimbursement subcontract; or
(2)
Any other subcontract involving more than $25,000, or 5 percent of the estimated cost of the prime contract. However, the cost-plus-a-percentage-of-cost system of contracting may not be used between contractors and subcontractors.

Regulation .04 Types of Cost Incentive Contracts.Copy Citation

A.
Definitions.
(1)
“Cost-plus incentive fee” means a contract which provides for the reimbursement to the contractor of allowable costs incurred up to a ceiling amount and establishes a formula by which the contractor is rewarded for performing at less than target cost or is penalized if it exceeds target cost.
(2)
“Fixed-price incentive contract” means a fixed-price contract in which the parties establish at the outset a target for performance and a formula by which the contractor is rewarded for exceeding performance and penalized if performance is not met.
(3)
“Target” means the parties agreed best estimate.
B.
Determinations.
(1)
Before entering into any incentive contract, the procurement officer shall make a determination that the proposed contractor's accounting system shall permit timely development of all necessary cost data in the form required by the specific type of contract contemplated and that the contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles.
(2)
Before entering any cost-plus incentive fee contract, the procurement officer shall make the additional determinations required under Regulation .03B(2)(a).

Regulation .05 Time and Material Contracts Labor Hour Contracts.Copy Citation

A.
Definitions.
(1)
“Labor hour contract” means a contract which only provides for the payment of labor performed.
(2)
“Time and material contract” means a contract which provides an agreed basis for payment for materials supplied and labor performed.
B.
Ceiling. Labor hour and time and material contracts shall state a dollar ceiling that may not be exceeded without the prior determination and approval of the procurement officer.
C.
Determinations. Labor hour and time and material contracts shall be entered into only after the procurement officer or designee determines that:
(1)
State personnel have been assigned to closely monitor the performance of the work; and
(2)
In the circumstances, it would not be practicable to use any other type of contract to obtain the needed items in the time required and at the lowest cost or price to the State.

Regulation .06 Quantity Contracts Requirements Contracts.Copy Citation

A.
Definitions.
(1)
“Definite quantity contract” means a fixed-price contract that provides for delivery of a specified amount of goods or labor either at specified times or when ordered.
(2)
“Indefinite quantity contract” means a contract for an indefinite amount of goods or labor to be furnished at specified times, or as ordered, that establishes unit prices of a fixed-price type.
(3)
“Requirements contract” means an indefinite quantity contract for goods or labor that obligates the State to order all the actual requirements of designated using agencies during a specified period of time.
B.
Application.
(1)
Indefinite Quantity Contract. An approximate quantity or the best information available as to quantity shall be stated in the solicitation and the contract. The contract may provide a minimum quantity the State is obligated to order and may provide a maximum quantity that limits the State's obligation to order.
(2)
Requirements Contracts. Requirements contracts shall include the following:
(a)
A provision that requires the State to order its actual requirements of the goods or labor covered, provided, however, that the State may reserve in the solicitation and in the resulting contract the right to take bids separately if a particular quantity requirement arises that exceeds the State's normal requirements or an amount specified in the contract; and
(b)
Two exemptions from ordering under the contract:
(i)
When the procurement officer approves a finding that the goods or labor available under the contract may not meet a nonrecurring, special need of the State, or
(ii)
Goods are produced or labor is performed incidental to the State's own programs, such as Maryland Correctional Enterprises, that can satisfy the need.

Regulation .07 Personal Property Leases.Copy Citation

A.
Definition. “Lease” means a contract for the use of supplies that are not owned by the State.
B.
Application. A lease may be entered into if:
(1)
It is in the best interest of the State;
(2)
All conditions for renewal and costs of termination are set forth in the lease; and
(3)
The lease is not used to circumvent normal procurement procedures.

Regulation .08 Lease with Purchase Option.Copy Citation

A.
A purchase option in a lease may be exercised only if the lease containing the purchase option was awarded under competitive sealed bidding, competitive sealed proposals, or competitive small procurement procedures, or the leased supply or facility is the only supply or facility that can meet the State's requirements, as determined in writing by the agency head.
B.
Before exercising the option, the procurement officer shall:
(1)
Investigate alternative means of procuring comparable supplies;
(2)
Compare estimated costs and benefits associated with the alternative means and the exercise of the option; and
(3)
Obtain review and approval of the appropriate Department.

Regulation .09 Multi-Year Contracts.Copy Citation

A.
Application. A multi-year contract is appropriate when it is in the best interest of the State to obtain uninterrupted services extending over more than one fiscal period, when the performance of the services involves high start-up costs, or when a changeover of services contractors involves high phase-in/phase-out costs during a transition period. The multi-year method of contracting is also appropriate when special production of definite quantities of supplies for more than one fiscal period is necessary to best meet the State needs but funds are available only for the initial fiscal period.
B.
Objective. The objective of the multi-year contract is to promote economy and efficiency in procurement by obtaining the benefits of sustained volume production and consequent low prices, and by increasing competitive participation in procurements which involve special production or high phase-in/phase-out costs during changeover of service contractors.
C.
Conditions for Use of Multi-year Contracts. A multi-year contract may be used when it is determined by the procurement officer that:
(1)
Special production of definite quantities or the furnishing of long-term services are required to meet State needs;
(2)
Estimated requirements cover the period of the contract and are reasonably firm and continuing; and
(3)
A multi-year contract shall serve the best interests of the State by encouraging effective competition or otherwise promoting economies in State procurement. The following factors are among those relevant to this determination:
(a)
Firms which are not willing or able to compete because of high start-up costs or capital investment in facility expansion shall be encouraged to participate in the competition when they are assured of recouping these costs during the period of contract performance;
(b)
Lower production costs because of larger quantity or service requirements, and substantial continuity of production or performance over a longer period of time, can be expected to result in lower unit prices;
(c)
Stabilization of the contractor's work force over a longer period of time may promote economy and consistent quality; or
(d)
The cost and burden of contract solicitation, award, and administration of the procurement may be reduced.
D.
Multi-year Contract Procedure.
(1)
Solicitation. The solicitation shall state:
(a)
The amount of supplies or services required for the proposed contract period;
(b)
That a unit price shall be given for each supply or service, and that these unit prices shall be the same throughout the contract (except to the extent price adjustments may be provided in the solicitation and resulting contract);
(c)
That the multi-year contract shall be cancelled automatically if funds are not appropriated or otherwise made available to support continuation of performance in any fiscal period succeeding the first; however, this does not affect either the State's rights or the contractor's rights under any termination clause in the contract;
(d)
That the procurement officer shall notify the contractor on a timely basis that the funds are, or are not, available for the continuation of the contract for each succeeding fiscal period;
(e)
Whether bidders or offerors may submit prices for:
(i)
The first fiscal period only,
(ii)
The entire time of performance only, or
(iii)
Both the first fiscal period and the entire time of performance;
(f)
That a multi-year contract may be awarded and how prices shall be determined, if prices for the first fiscal period and entire time of performance are submitted;
(g)
That the effect of termination is to discharge both parties from future performance of the contract, but not from their existing obligations. The contractor shall be reimbursed for the reasonable value of any nonrecurring costs incurred but not amortized in the price of the supplies or services delivered under the contract.
(2)
Award. Award shall be made as stated in the solicitation and permitted under the procurement method utilized.

Regulation .10 Multiple Awards.Copy Citation

When a multiple award is made, all State agencies shall order all of their actual normal requirements for the specified supplies or services from contractors awarded the contract. A multiple award may be in the State's best interest when an award to two or more bidders or offerors for similar products is needed for adequate delivery, service, availability, or for product compatibility. In making a multiple award, care shall be exercised to protect and promote the principles of competitive solicitation. Multiple awards may not be made when a single award will meet the State's needs without sacrifice of economy or service.

Chapter 04. Cost or Price Requirements

Regulation .01 Submission of Information.Copy Citation

Each contractor shall submit cost or price information and shall certify that, to the best of the contractor's knowledge, the information submitted is accurate, complete, and current as of the mutually determined specified date before the date the price of any:
A.
Negotiated contract is determined, if the total contract price is expected to exceed $100,000 or a smaller amount set by the procurement officer; or
B.
Change order or contract modification is determined when it is expected to exceed $100,000 or a smaller amount set by the procurement officer.

Regulation .02 Cost and Price Certificate.Copy Citation

Every contract, change order, or modification under which a cost and price certificate is required shall contain a provision that the price, including profit or fee, shall be adjusted to exclude any significant price increases occurring because the contractor furnished cost or price information which, as of the date agreed upon between the parties, was inaccurate, incomplete, or not current. The specific contract clause is contained in COMAR 21.07.

Regulation .03 Exemption.Copy Citation

This chapter does not apply to a lease of real property, an amendment to a lease of real property, or a contract for which the price negotiated is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation.

Chapter 05. Plant Inspection, Audit and Retention of Records

Regulation .01 Right to Inspect.Copy Citation

Designees of the procurement agency, the Department of Legislative Services, or any other State unit authorized by law, may inspect at reasonable times the plant, place of business, or jobsite of any bidder or offeror, contractor, prospective subcontractor or assignee, or subcontractor or assignee.

Regulation .02 Audits.Copy Citation

A.
Audit of Cost or Pricing Data. Designees of the procurement agency, the Department of Legislative Services, or any other State unit authorized by law may audit during the record retention period the books and records of any person who has submitted cost or pricing data to the extent that the books and records relate to the cost or pricing data.
B.
Contract Audit. Designees of the procurement agency, the Department of Legislative Services, or any other State unit authorized by law shall be entitled to audit the books and records of a contractor or any subcontractor under any negotiated contract or subcontract other than a firm fixed-price contract to the extent that the books and records relate to the performance of the contract or subcontract, or if the agency has reason to believe, from an audit of a cost type contract, that costs have been inappropriately assigned to a cost type contract from a fixed price contract.

Regulation .03 Record Retention.Copy Citation

The contractor or subcontractor shall maintain books and records that relate to the cost or pricing data for 3 years from the date of final payment under the contract, unless a longer period is otherwise specified in the contract.

Chapter 06. Retainage

Regulation .01 Construction Contract Retainage.Copy Citation

A.
This regulation applies to a construction contract for which a contractor has furnished 100 percent payment security and 100 percent performance security.
B.
The percent for retainage specified in a contract under §A of this regulation may not exceed 5 percent of the contract amount.
C.
In addition to retainage, a primary procurement unit and the Maryland Transportation Authority may withhold from payments otherwise due a contractor an amount that the unit reasonably believes is necessary to protect the State's interest.
D.
A contractor may not retain from a payment due a subcontractor a percent of the payment greater than the percent for retainage retained by the primary procurement unit or the Maryland Transportation Authority.
E.
A subcontractor may not retain from a payment due a lower-tier subcontractor a percent of the payment greater than the percent of payments retained from the subcontractor.
F.
A contractor and a subcontractor are not prohibited, by §§D and E of this regulation, from withholding an amount in addition to retainage if the contractor or subcontractor determines that a subcontractor's performance under the subcontract provides reasonable grounds for withholding the additional amount.

Regulation .02 Escrow of Retainage.Copy Citation

A.
This regulation applies to all construction contracts unless:
(1)
The contract is funded in whole or in part with tax-exempt financing; or
(2)
It conflicts with any federal grant or regulation affecting the contract.
B.
The invitation for bids, request for proposals, or the contract documents to be executed by a contractor shall include a form on which the contractor may elect to have retainage placed in an escrow account.
C.
A contractor's election on the use of an escrow account for retainage is not revocable.
D.
A contractor awarded a construction contract may elect to have retainage placed in an escrow account if the contractor:
(1)
Elects that procedure on the form provided by the procurement agency; and
(2)
Submits with the contract documents the escrow agreement provided by the procurement agency, executed by the contractor, the escrow agent, and, if applicable, the surety.
E.
The contractor shall select an escrow agent from among the banks approved by the State Treasurer for use by State agencies.
F.
The contractor is liable to the escrow agent for the payment of fees and charges in connection with the establishment and maintenance of the escrow account.
G.
Funds, other than retainage, withheld by the procurement agency, may not be paid to the escrow agent.
H.
Retained funds may be released only as directed by the procurement agency.
I.
At the time of final payment, the procurement agency shall direct the escrow agent to settle the escrow account by paying funds from the escrow account:
(1)
To the procurement agency for any claim it may have against the contractor under the contract;
(2)
Unless waived by the Board of Public Works, to the Comptroller for any claim over $50 against the contractor by the State, a unit, or a State-controlled governmental agency; and
(3)
To the contractor.
J.
Until the escrow agent makes payment as directed, funds in the escrow account are State funds and are not subject to any liens.

Chapter 07. Bid and Contract Security/Bonds

Regulation .01 General.Copy Citation

A.
Nothing contained in this chapter prevents a procurement officer from requiring performance or payment bonds, or both, on supply, service, maintenance, or construction-related service contracts if the contract is expected to exceed $100,000.
B.
Acceptable security for bid, performance, and payment bonds is limited to:
(1)
A bond in a form satisfactory to the State underwritten by a surety company authorized to do business in this State;
(2)
A bank certified check, bank cashier's check, bank treasurer's check, cash, or trust account;
(3)
Pledge of securities backed by the full faith and credit of the United States government or bonds issued by the State;
(4)
An irrevocable letter of credit in a form satisfactory to the Attorney General and issued by a financial institution approved by the State Treasurer; or
(5)
For performance security on construction contracts, the grant of a mortgage or deed of trust on real property located in the State when:
(a)
Satisfactory to the procurement officer,
(b)
The face amount of the instrument does not exceed 75 percent of the contractor's equity interest in the property, and
(c)
The assignment of the mortgage or deed of trust is recorded in the county land records pursuant to Real Property Article, §3-103, Annotated Code of Maryland.
C.
When a vendor or contractor elects to use cash as security for bid, performance, and payment bonds, the following procedural requirements shall be observed:
(1)
The General Accounting Division of the Office of the Comptroller of the Treasury shall be contacted and an appointment made with the head of the General Accounting Division or the head's designee to deliver the cash security;
(2)
An authorized representative of the vendor or contractor shall hand deliver the cash security to the head of the General Accounting Division or the head's designee;
(3)
An indication of the solicitation or contract number, description of the contract, date of bid/proposal opening, and the name of the contracting agency shall be submitted with the cash security;
(4)
The cash security shall be counted publicly in the presence of at least two State employees of the General Accounting Division and the authorized representative of the vendor or contractor; and
(5)
The acceptance of the cash security shall be acknowledged by a written receipt signed by the head of the General Accounting Division or the head's designee, the two employees witnessing the transaction and the vendor/contractor representative witnessing the amount of cash counted. In the case of bid bonds, the written receipt issued by the General Accounting Division shall be included in the vendor's bid package at the time of public opening of bids.
D.
Except as provided in §§B and D(3) of Regulation .09 of this chapter, failure of vendors to comply with these procedures regarding bid bonds will result in the determination by the procurement officer that the bid is nonresponsive.
E.
Bid or contract security submitted in the form of cash shall be invested by the State Treasurer and the proceeds of any interest earned by this investment shall accrue to the State of Maryland, General Fund, and may not be credited to the account of the vendor/contractor.
F.
Any of the forms of security listed in §B of this regulation are permitted unless otherwise stated in the solicitation. Solicitations that require bid security shall include notice to all bidders that bid security shall be in a form of security authorized by this chapter.
G.
Nothing in this chapter requires the procurement officer to accept a nonresponsive bid.
H.
If a prime contractor on a State contract requires a subcontractor to provide a bid, performance, or payment bond on a procurement contract for services, supplies, or construction-related services, the prime contractor may not require bid, performance, or payment bonding from the subcontractor that is more stringent than the bonding requirements of this chapter.
I.
A bid, performance, or payment bond that is provided by a subcontractor shall be accepted by the prime contractor on a State contract if the bond would be acceptable to the State and provided by:
(1)
A surety company authorized to do business in the State; or
(2)
The Maryland Small Business Development Financing Authority.

Regulation .02 Submission of Individual Surety Bonds — RepealedCopy Citation

Regulation .03 Acceptability of Individual Sureties — RepealedCopy Citation

Regulation .04 Security Interests by an Individual Surety — RepealedCopy Citation

Regulation .05 Acceptability of Assets — RepealedCopy Citation

Regulation .06 Unacceptable Assets — RepealedCopy Citation

Regulation .07 Acceptance of Real Property — RepealedCopy Citation

Regulation .08 Acceptance of Personal Property — RepealedCopy Citation

Regulation .09 Bid Security.Copy Citation

A.
General.
(1)
Solicitations on all State construction contracts when the contract is expected to exceed $100,000 require the submission of bid security in an amount equal to at least 5 percent of the amount of the bid or price proposal except that, for bids stating a rate but not a total cost, the bid bond shall be in an amount as determined by the procurement officer. Bid security or evidence of the posting of bid security shall be submitted with the bid or proposal. Bid bonds may be required for any other procurement over $50,000, as determined by the procurement officer. If a contractor fails to accompany its bid with the required bid security, the bid shall be considered nonresponsive and rejected except as provided by §§B and D of this regulation.
(2)
A procurement officer may require a bid security for a bid or proposal for services, supplies, maintenance, or construction-related services if the contract is expected to exceed $50,000. The procurement officer shall set the amount of the security.
B.
Failure to Comply. If bid security is provided by a bidder in an amount less than that required by this regulation, the bid shall be rejected as nonresponsive, unless the procurement officer determines that the deficiency in the amount of security provided is insubstantial and acceptance is in the best interests of the State, and that:
(1)
Only one bid or proposal was received, and there is insufficient time to rebid the contract;
(2)
The bid security became inadequate as a result of the correction of a mistake in the bid or proposal, or as a result of a modification in the bid or proposal in accordance with applicable regulations, and the bidder or offeror increased the amount of bid security to required limits within 48 hours after the correction or modification; or
(3)
After consideration of the risks involved and the difference between the lowest bid and the next lowest bid, fiscal advantage could reasonably be expected to accrue to the State from acceptance of the lowest bid.
C.
Withdrawal of Bid or Proposal Before Award. If a bidder or offeror is permitted to withdraw a bid or proposal before award because of a mistake in the bid or proposal, action may not be taken against the bid security. Otherwise, action may be taken against the bid security of a bidder or offeror that withdraws a bid or offer.
D.
Forms of Bid Bonds.
(1)
The preferred form of a bid bond is as follows:
(2)
Unless prohibited by the solicitation, a bid bond on a form other than the preferred form under §D(1) of this regulation may be accepted if the form provides that the principal and the surety shall be liable under the bond in an amount at least equal to the difference between the amount of the principal's bid and such other amount or amounts for which the obligee may contract with another party to perform as required by the solicitation for which the principal's bid was submitted.
(3)
Extensions of Time for Acceptance of Bid.
(a)
In this subsection, “acceptance period” means the period during which bids remain irrevocable as provided in the solicitation or in COMAR 21.05.02.19A.
(b)
If a solicitation requires a bid bond to contain consent of the surety to an extension of the acceptance period and the bid bond fails to meet that requirement, the bid:
(i)
May not be rejected as nonresponsive on that basis alone during the acceptance period; and
(ii)
Shall be rejected as nonresponsive if written consent to an extension has not been provided by the bidder and the surety during the acceptance period or an additional period of time set by the procurement officer which is approved by the head of the procurement agency.
(4)
Authenticity and Enforceability of Powers of Attorney.
(a)
Any person signing a bid bond as an attorney-in-fact shall include with the bid bond evidence of authority to bind the surety.
(b)
An original, or a photocopy or facsimile of an original, power of attorney is sufficient evidence of such authority.
(c)
For purposes of this section, verified electronic, mechanically-applied and printed signatures, seals and dates on the power of attorney shall be considered original signatures, seals and dates, without regard to the order in which they were affixed.
(d)
The procurement officer shall:
(i)
Treat the failure to provide a signed and dated power of attorney at the time of bid opening as a matter of responsiveness; and
(ii)
Treat questions regarding the authenticity and enforceability of the power of attorney at the time of bid opening as a matter of responsibility. These questions are handled after bid opening.
(e)
If the procurement officer contacts the surety to validate the power of attorney, the contracting officer shall document the file providing, at a minimum, the following information:
(i)
Name of person contacted;
(ii)
Date and time of contact; and
(iii)
Response of the surety.
(f)
If, upon investigation, the surety declares the power of attorney to have been valid at the time of bid opening, the procurement officer may require correction of any technical error with the power of attorney.
(g)
If, upon investigation, the surety declares the power of attorney to have been invalid, the procurement officer shall determine the bid to be nonresponsive and not allow the bidder to substitute a replacement power of attorney or a replacement surety.
BID BOND

Regulation .10 Performance and Payment Bonds.Copy Citation

A.
Performance Bonds.
(1)
General. A performance bond is required for all construction contracts in excess of $100,000 in the amount equal to at least 100 percent of the contract price. A performance bond may be required for a contract for services, supplies, maintenance, or construction-related services expected to exceed $100,000, as determined by the procurement officer. The performance bond shall be delivered by the contractor to the State not later than the time the contract is executed. If a contractor fails to deliver the required performance bond, the contractor’s bid shall be rejected, its bid security shall be enforced, and award of the contract may be made to the next lowest responsive and responsible bidder.
(2)
Reduction of Amount Before Solicitation. The head of a procurement agency may reduce the amount of the performance bond required before solicitation if, after completing appropriate analysis, it is determined in writing by the head of a procurement agency to be less costly or more advantageous to the State to self-insure a part of the performance of the contractor. An analysis may be made for groups of contracts, or may be made on particular contracts, as the head of a procurement agency chooses. A copy of the analysis shall be available for public inspection.
B.
Payment Bonds.
(1)
General. A payment bond is required for all construction contracts in excess of $100,000 in the amount equal to at least 100 percent of the contract price. The payment bond shall be delivered by the contractor to the State not later than the time the contract is executed. If a contractor fails to deliver the required payment bond, the contractor's bid shall be rejected, its bid security shall be enforced, and award of the contract shall be made to the next lowest responsive and responsible bidder.
(2)
Reduction of Amount Before Solicitation. Before solicitation, the head of a procurement agency may reduce the amount of the payment bond to not less than 50 percent of the contract price if a written determination is made that it is in the best interest of the State to do so. Factors to be considered in order to make the determination include, but are not limited to:
(a)
The value and number of subcontracts to be awarded by the contractor; and
(b)
The value of the contract.
C.
Forms for Performance and Payment Bonds. The required performance and payment bonds shall be in the form specified in COMAR 21.07.02.10.

Regulation .11 Federal Requirements.Copy Citation

To the extent required by federal law or the conditions governing federally assisted procurements, bid, performance, or payment securities are governed by the federal requirements, notwithstanding Regulations .01—.10 of this chapter.

Chapter 08. Inspection, Acceptance, Replacements, Revocation, and Rejection

Regulation .01 Inspection.Copy Citation

A.
Right to Inspect. The procurement agency may, before payment or acceptance, inspect at the time and the place of delivery labor performed or goods delivered pursuant to the contract.
B.
Right to Reject and Notice of Rejection.
(1)
The procurement agency shall inform the contractor of rejection of labor or goods within a reasonable time after delivery. The contractor shall be responsible for the labor or goods so rejected and any expenses once a rejection occurs. The procurement agency shall assume no responsibility for rejected labor or goods. After inspection, the procurement agency may, at its option:
(a)
Return rejected goods to the contractor and forward along with the damaged goods the consignee's copy of the bill, if any, and the inspection report;
(b)
Request removal of the goods; or
(c)
Reject labor performed.
(2)
If the contractor fails to remove rejected items from the using agency's premises within a reasonable time, the procurement agency may take any action it deems appropriate, including but not limited to:
(a)
Store the items at the contractor's expense;
(b)
Reship them to the contractor and charge the contractor's account;
(c)
Resell the items and retain a reasonable amount for its expenses.
C.
Revocation of Acceptance.
(1)
The procurement agency may revoke its acceptance of any labor or goods:
(a)
That do not conform to the contract and that non-conformity reasonably impairs their value; or
(b)
The acceptance of which assumed that the non-conformity would be cured within a reasonable time and this has not been accomplished.
(2)
A revocation of acceptance shall constitute a rejection. The procurement agency shall send the contractor notification of revocation of acceptance within a reasonable time. The contractor shall deliver to the procurement agency instructions for the return of the items. The procurement agency may, if the contractor fails to provide shipping instructions, take any action it deems appropriate, including but not limited to:
(a)
Store the items at the contractor's expense;
(b)
Reship the items at contractor's expense;
(c)
Resell the items and retain a reasonable amount from the sale price to cover its expenses.
D.
Risk of Loss.
(1)
If the contract requires or authorizes the contractor to ship the items by a particular carrier, and requires delivery only to the carrier, then the risk of loss passes to the procurement agency when conforming goods are duly delivered to the carrier.
(2)
If the contract requires the contractor to deliver the items to a particular destination, and conforming items are so delivered, the risk of loss passes to the procurement agency only upon the arrival of the items at that destination.
E.
Reservation of Rights. Nothing contained in this chapter shall be construed in any way to limit the rights of the State under any law, including the Commercial Law Article, which may be applicable to any transaction governed by these regulations.

Regulation .02 Inspection and Testing of Supplies and Services.Copy Citation

A.
Solicitation Provisions. Contracts may provide that the State may inspect labor or goods at the contractor's or subcontractor's facility and perform tests to determine whether they conform to solicitation requirements, or, after award, to contract requirements, and may be accepted. The inspections and tests shall be conducted in accordance with the terms of the solicitation or the contract.
B.
Procedures for Trial Use and Testing. The procurement officer may establish operational procedures governing the testing and trial use of labor or goods and the application of resulting information and data to specifications or procurements.
C.
Conduct of Inspections.
(1)
Inspectors. Inspections or tests shall be performed so as not to unduly delay the work of the contractor or subcontractor. No inspector other than the procurement officer may change any provision of the specifications or the contract without written authorization. The presence or absence of an inspector does not relieve the contractor or subcontractor from any requirements of the contract.
(2)
Location. When an inspection is made in the plant or place of business of a contractor or subcontractor, the contractor or subcontractor shall provide, without charge, all reasonable facilities and assistance for the safety and convenience of the person or persons performing the inspection or testing.
(3)
Time. Inspection or testing of supplies and services performed at the plant or place of business of any contractor or subcontractor shall be performed at reasonable times.

Chapter 09. Invoicing, Payment, and Interest on Late Payments

Regulation .01 Definitions.Copy Citation

A.
In this chapter, the following terms have the meanings indicated.
B.
Terms Defined.
(1)
“Late payment” means any amount that is due and payable by law under a written procurement contract, without deferral, delay, or set-off under COMAR 21.02.07.03, and remains unpaid more than 37 days after an agency receives a proper invoice.
(2)
“Payment” includes all required processing and authorization by the Comptroller of the Treasury, as provided under COMAR 21.02.07, and may be deferred, delayed, or set-off as applicable under COMAR 21.02.07.03.
(3)
“Proper invoice” means a bill, written document, or electronic transmission, readable by the agency, provided by a vendor requesting an amount that is due and payable by law under a written procurement contract for property received or services rendered that meets the requirements of Regulation .02 of this chapter.

Regulation .02 Required Invoice Documentation.Copy Citation

A Proper invoice, required as payment documentation, must include the following information, without error:
A.
The contractor’s federal employer’s identification number or Social Security number;
B.
The procurement contract or purchase order number or another adequate description of the procurement contract; and
C.
Any documentation required by regulation or the procurement contract.

Regulation .03 Receipt of Invoices.Copy Citation

For the purposes of determining a payment due date and the date on which interest will begin to accrue if a payment is late, an invoice shall be deemed to be received:
A.
For invoices that are mailed, when a proper invoice is received by the agency, as of the date the agency annotates the invoice with the date and time of receipt; or
B.
For invoices electronically transmitted, on the date the transmission is received by the agency, or the next business day if received after 5 p.m. Eastern Time.

Regulation .04 Review of Invoices.Copy Citation

Upon receipt of an invoice, an agency shall use the following procedures:
A.
Each invoice will be reviewed by the agency as soon as practicable after receipt, but no later than 5 business days after receipt, to determine whether the invoice is a proper invoice as defined in Regulation .01 of this chapter.
B.
When the agency receives the invoice, the agency shall mark the invoice with the date the invoice was received.
C.
Once the agency determines the invoice is proper, the agency shall submit the invoice to the Comptroller for payment within one business day after the determination.
D.
If an agency determines the invoice is not a proper invoice, the agency shall notify the vendor of all defects that prevent processing and specify all reasons why the invoice is not proper within two business days after the determination. It is the responsibility of the vendor to submit a corrected invoice.
E.
Media which produce tangible recordings of information may be used by agencies to expedite the payment process, rather than delaying the process by requiring original paper documents. Agencies shall provide adequate safeguards and controls to ensure the integrity of the data and to prevent duplicate processing.
F.
Failure to comply with this regulation does not constitute a late payment as that term is defined in this chapter.

Regulation .05 Payment Period.Copy Citation

A.
Unless payment is deferred, delayed, or set-off under COMAR 21.02.07.03, payment under a procurement contract shall be made within 30 days:
(1)
After the day on which the payment becomes due under the procurement contract; or
(2)
If later, after the day on which the agency receives a proper invoice.
B.
Payment will be considered to be made on the settlement date for an electronic funds transfer payment or the mailing date of the check for a check payment.
C.
Payments falling due on a weekend, State holiday, or federal holiday may be made on the following business day without incurring late payment interest penalties.

Regulation .06 Interest on Late Payments.Copy Citation

A.
The State shall pay interest on late payments as defined in Regulation .01 of this chapter at the rate of 9 percent per annum if:
(1)
The vendor submits an invoice for the late payment interest within 30 days after the date of the State’s payment of the amount on which the interest accrued; and
(2)
A contract claim has not been filed under State Finance and Procurement Article, Title 15, Subtitle 2, Annotated Code of Maryland.
B.
The State is not liable for interest:
(1)
Accruing more than one year after the 31st day after the agency receives the proper invoice; or
(2)
On any amount representing unpaid interest.