Magic Words to Stop the Worst DBE and MWBE Abuse (Part 2)

In our last article we identified the issue—a terrible problem plaguing DBE and MWBE subcontractors—wasting their time, draining their resources and crushing their expectations. We heard from a lot of you in response and appreciate your feedback and encouragement in addressing this problem that no one in the industry seems to want to talk about. That problem is, the practice of prime contractors soliciting proposals from you, including them in their bid, and then, after the prime contract is awarded to them, forgetting that you exist.

What makes this bad practice all the more galling is that they’re using and enjoying the benefit of your DBE and MWBE certification to make their bids look more attractive to procurement officers under pressure to meet DBE and MWBE contracting goals. (State agencies receiving federal money often get audited to check if the DBE and MWBE goals they claim to have met are backed up by proof of dollars actually paid to DBEs and MWBEs.)

So prime contractors are using you to help them win bids and then kicking you to the curb upon award. Sound familiar? You’re committed to them, but they’re not committed to you. The law would require you to honor your proposal and enter a subcontract upon award. But they can legally cast you aside. How is this legal? It’s complicated. But don’t let that get you depressed.

Rather than bore you with a long-drawn explanation of the prevailing contract law that might inform but not really help, we’re going to give you some language that you can insert in your subcontract proposals that might, emphasis on the might, bind the prime contractor to honor his commitment and enter a subcontract with you upon award. (Magic words don’t work all the time, right?)

The idea is based on the legal concept called “promissory estoppel.” If the prime contractor has led you to believe that he would enter a subcontract with you upon contract award—assured you in some way that you would get the subcontract—and you relied (perhaps to your detriment) on that assurance (perhaps a promise), and acted on your belief by committing time and resources to the cause with the expectation that the subcontract would be yours—if all this were the case, then you may have a shot at making the prime contractor live up to his commitment. It is this idea that the following language puts in writing:

“Subcontractor has devoted time, money, and resources toward preparing this bid in exchange for Customer’s express agreement that the parties shall have a binding contract consistent with the terms of this bid proposal and Customer unconditionally and irrevocably accepts this bid proposal if it (A) in any way uses or relies on the bid proposal or information therein to prepare “Customer’s bid” for the project at issue and Customer is awarded a contract for the work; or (B) divulges the bid or any information therein to others competing with Subcontractor for the work.”

This isn’t our language. It was developed and proposed by the American Subcontractor’s Association in 2013 to combat bid shopping, and probably largely ignored or forgotten because, generally speaking, the problem we’re talking about is not as huge a problem for non-MWBE and non-DBE subcontractors as it is for you. They’re being hired on the basis of price, efficiency and quality of work, and not because of the bidding preference an MWBE or DBE certification provides.

But that’s beside the point. The point is, this language has new value now because it can be used by you—all the hopeful and hardworking DBEs and MWBEs out there—to protect yourselves from wasting time and resources and from disappointment. It has value for those of you operating in a public contract bidding system, which, by establishing minority and women contacting goals and trying to level the playing field for DBEs and MWBEs, has created a perverse incentive for prime contractors to solicit subcontracting proposals simply for the purpose of winning the bid, while never intending to actually hire you.

More on this to come…