Can a Virginia city avoid competitive bidding for Children's Services Act therapy contracts by buying services one child at a time instead of in bulk?

Plain-English summary

The Norfolk City Attorney asked three related questions about how the Virginia Public Procurement Act applies to Children's Services Act (CSA) personal-service purchases. Specifically: (1) Can a local public body stop competitively procuring services it knows in advance multiple kids will need, and instead procure for each individual as the need arises? (2) Can services be split up to avoid competitive requirements? (3) Does "bulk procurement" mean any quantity above an individual?

Attorney General Mark R. Herring laid out a careful, multi-part answer.

On disaggregating known multi-recipient needs: the prior practice of using term contracts for the same service across multiple recipients weighs against using the individual-recipient exception. But it doesn't necessarily preclude it. There may be sound reasons to procure individually when term contract awardees have proven unsuitable for many participants' needs. The good-faith judgment is the public body's.

On splitting procurement to avoid competition: not allowed. The General Assembly's intent under § 2.2-4300(C) is "that competition be sought to the maximum feasible degree." A public body has broad discretion to determine what it needs, but cannot manipulate the structure of its needs to dodge the competitive process.

On "bulk": the AG read "bulk" as a quantity term, not a per-recipient count. Bulk refers to large quantities of a service of the same type, where the volume is high enough that the public body could reasonably expect price or other concessions compared to "retail" purchasing. The mere fact that more than one recipient needs the service doesn't make it bulk. But if the volume of a single type of service is high enough that you'd expect concessions, competitive sealed bidding or negotiation is required.

The opinion also reminded localities that § 2.2-4345(A)(14) only exempts them from the formal procurement methods. The CSA's separate requirement in § 2.2-5214 that rates "shall be determined by competition of the market place" still applies. So even when the formal sealed-bid or negotiation process is exempt, there must still be some assurance that the agreed rates are market-competitive.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The CSA and VPPA have been amended periodically since 2017, including changes to local body exemptions in § 2.2-4343 and clarifications around CSA rate-setting and the State Executive Council's service fee directory. Local procurement officers should check current statutory text and current Office of Children's Services guidance.

Background and statutory framework

The Children's Services Act, §§ 2.2-5200 to 2.2-5214, coordinates the funding and delivery of services to at-risk and court-involved children in Virginia. Section 2.2-5214 says rates paid for CSA services "shall be determined by competition of the market place," without prescribing specific procurement procedures.

The Virginia Public Procurement Act, §§ 2.2-4300 to 2.2-4377, supplies the procedures. The two standard methods are competitive sealed bidding (§ 2.2-4302.1) and competitive negotiation (§ 2.2-4302.2). Section 2.2-4303(A) requires that public contracts with nongovernmental contractors for services be awarded after one of these two methods "unless otherwise authorized by law."

Section 2.2-4345(A)(14) is the relevant exception. It exempts certain public bodies, when administering certain programs, from the sealed-bidding or negotiation requirements for personal services purchased for individual recipients:

Public bodies administering public assistance and social services programs as defined in § 63.2-100, community services boards as defined in § 37.2-100, or any public body purchasing services under the Children's Services Act (§ 2.2-5200 et seq.) or the Virginia Juvenile Community Crime Control Act (§ 16.1-309.2 et seq.) for goods or personal services for direct use by the recipients of such programs if the procurement is made for an individual recipient. Contracts for the bulk procurement of goods or services for the use of recipients shall not be exempted from the requirements of § 2.2-4303.

The exception has three operating elements: (1) the service must be a personal service for direct use by program recipients; (2) the procurement must be made for an individual recipient; and (3) it must not be at a level that constitutes "bulk procurement." Note that some local public bodies are also exempt from significant portions of the VPPA generally under § 2.2-4343(A)(9)-(12); the opinion addresses bodies that have not exempted themselves separately.

On the "individual recipient" requirement, the AG observed that prior knowledge that the same service will be needed by multiple individuals, and any prior practice of using a single combined procurement for them, weighs in favor of a combined competitive procurement. Combining yields competition, public confidence, and administrative efficiency. But those factors are not absolute. Sometimes prior term contracts have produced awardees suitable for only a small fraction of the populations they were meant to serve. A public body retains good-faith discretion to procure individually when a combined approach has demonstrated limits.

On splitting to avoid competition, the AG was unequivocal. The intent of the VPPA under § 2.2-4300(C) is "that competition be sought to the maximum feasible degree." Public bodies cannot alter their determination of needs to manipulate the procurement process. Splitting a single procurement into individual transactions to dodge competitive thresholds is unauthorized.

On "bulk," the AG applied the ordinary-meaning rule from City of Va. Beach v. Bd. of Supvrs., 246 Va. 233, 236 (1993). Webster's defines "bulk" as relating to materials in large quantities. The term targets the quantity procured, not the number of recipients. Because personal services are not perfectly fungible, the analysis asks whether the nature of the services and the billing method make it feasible to procure them as a single type of service in volumes high enough to expect price or other concessions over "retail" procurement. If yes, competitive sealed bidding or negotiation applies.

The opinion noted that the CSA's market-competition requirement on rates (§ 2.2-5214) is separate from the VPPA procedures and continues to apply when the formal procedures are exempt. In practice, that means even when § 2.2-4345(A)(14) exempts the public body from formal bidding, the body must still have a defensible mechanism to ensure the agreed rates are market-determined. The opinion flagged that the existing service fee directory, posted by the Office of Children's Services, recited that the State had not evaluated or approved the rates, so the directory alone did not satisfy the market-competition requirement.

Common questions

Q: Can a city avoid competitive bidding for therapy services for an individual child under the CSA?
A: The AG concluded yes, if the procurement is for a single individual recipient, the volume isn't "bulk," and the service is for direct use by the recipient. Section 2.2-4345(A)(14) exempts those purchases from formal sealed bidding or negotiation.

Q: What if the city knows multiple children will need the same service?
A: The AG concluded that prior knowledge of multi-recipient demand and prior practice of combined contracting weighs against using the individual-recipient exception, but does not always defeat it. There may be sound, documented reasons (such as prior term contracts that suited only a fraction of needs) to procure individually.

Q: Can the city split a $200,000 service need into 20 individual $10,000 procurements to avoid bidding?
A: No. The AG was explicit that splitting a single procurement to evade § 2.2-4345(A)(14)'s limits is unauthorized. The VPPA's intent is maximum feasible competition.

Q: When is procurement "bulk"?
A: When the nature of the services and billing method make it feasible to procure them as a single type of service in volumes high enough to expect price or other concessions over retail procurement. "Bulk" is about quantity, not the number of recipients.

Q: Does the CSA's market-rate requirement still apply when § 2.2-4345(A)(14) exempts formal bidding?
A: Yes. Section 2.2-5214 separately requires that CSA rates be determined by competition of the marketplace. Exempting the formal bidding procedures does not exempt the public body from ensuring market-competitive rates.

Q: Does this opinion apply to community services boards or local social services?
A: Section 2.2-4345(A)(14) by its terms applies to public bodies administering public assistance and social services programs as defined in § 63.2-100, community services boards as defined in § 37.2-100, and bodies purchasing under the CSA or Virginia Juvenile Community Crime Control Act. The same analysis governs them.

Citations and references

Virginia statutes:

• Va. Code Ann. § 2.2-4300 (declared intent of the VPPA)
• Va. Code Ann. § 2.2-4302 (local implementation)
• Va. Code Ann. § 2.2-4302.1 (competitive sealed bidding)
• Va. Code Ann. § 2.2-4302.2 (competitive negotiation)
• Va. Code Ann. § 2.2-4303 (general competitive-procurement requirement)
• Va. Code Ann. § 2.2-4343 (exemptions for certain local bodies)
• Va. Code Ann. § 2.2-4345 (statutory exceptions to competitive requirements)
• Va. Code Ann. §§ 2.2-4300 to 2.2-4377 (Virginia Public Procurement Act)
• Va. Code Ann. § 2.2-5200 (CSA purposes and definitions)
• Va. Code Ann. § 2.2-5206 (community policy and management teams)
• Va. Code Ann. § 2.2-5214 (CSA market-competition rate requirement)
• Va. Code Ann. §§ 2.2-5200 to 2.2-5214 (Children's Services Act)
• Va. Code Ann. § 16.1-309.2 (Virginia Juvenile Community Crime Control Act)
• Va. Code Ann. § 37.2-100 (community services board definitions)
• Va. Code Ann. § 63.2-100 (social services definitions)
• Va. Code Ann. § 2.2-505 (AG advisory opinion authority)

Cases:

• City of Va. Beach v. Bd. of Supvrs., 246 Va. 233 (1993)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2017/16-036-Pishko-bulk-procurement-services.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

April 6, 2017

Bernard A. Pishko, Esquire
Norfolk City Attorney
Office of the City Attorney
810 Union Street, Suite 900
Norfolk, Virginia 23510

Dear Mr. Pishko:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You ask whether, under § 2.2-4345(A)(14) (a provision of the Virginia Public Procurement Act), a local public body can stop competitively procuring certain personal services known in advance to be needed by multiple individuals, and instead non-competitively procure service as each individual recipient's need arises. You ask whether services can be disaggregated for the purpose of avoiding competitive procurement requirements. You also ask whether "bulk" procurement, as used in that section, refers to services needed for more than a single recipient.

Background

Your inquiry relates to the purchase of personal services pursuant to the Children's Services Act (the "CSA").[1] The CSA provides that rates paid for such services "shall be determined by competition of the market place ...."[2] The CSA does not prescribe specific methods for establishing competitive rates.[3]

Requirements for specific methods of procurement are found in the Virginia Public Procurement Act (the "VPPA").[4] Two key methods of procurement are competitive sealed bidding and competitive negotiation.[5] These competitive procedures may result in a term contract that allows public bodies to place orders for services as needed, at rates previously established through the competitive process. Certain public bodies are exempt from some or all of the VPPA.[6] This Opinion interprets § 2.2-4345(A)(14)[7] for public bodies that have not been exempted from that provision.

Applicable Law and Discussion

Section 2.2-4303 of the VPPA provides that all public contracts with nongovernmental contractors for the purchase of services shall be awarded after competitive sealed bidding or competitive negotiation "unless otherwise authorized by law."[8] One such law is § 2.2-4345(A)(14), which exempts the following public bodies from the requirement to use those two methods of procurement:

Public bodies administering public assistance and social services programs as defined in § 63.2-100, community services boards as defined in § 37.2-100, or any public body purchasing services under the Children's Services Act (§ 2.2-5200 et seq.) or the Virginia Juvenile Community Crime Control Act (§ 16.1-309.2 et seq.) for goods or personal services for direct use by the recipients of such programs if the procurement is made for an individual recipient. Contracts for the bulk procurement of goods or services for the use of recipients shall not be exempted from the requirements of § 2.2-4303.

When applicable, this exception merely exempts public bodies from the VPPA's requirement to use competitive sealed bidding or competitive negotiation. It does not exempt public bodies from the CSA's requirement to assure that the rates they pay are determined by competition of the market place.[9]

To qualify for the above exemption from competitive sealed bidding or competitive negotiation, services purchased under the CSA must be (1) personal services for direct use by program recipients; (2) purchased through a procurement that is made for an individual recipient; and (3) at a level that is below "bulk procurement."[10] Your inquiry does not address direct use,[11] but rather, focuses on the "individual recipient" and "bulk procurement" limitations in the above exception.

Turning first to the "individual recipient" requirement, you ask for an opinion on whether § 2.2-4345(A)(14) authorizes public bodies to stop competitively procuring services known in advance to be needed by multiple individuals and instead procure the service for each individual on a non-competitive basis as each individual's need arises. You indicate in your opinion that "services cannot be disaggregated for the purpose of avoiding competitive requirements."

A public body's knowledge that the same service will be needed by multiple individuals, and its prior practice of using a combined procurement for multiple individuals, are factors favoring a combined procurement.[12] But these factors do not necessarily preclude the possibility of appropriate contrary considerations, such as prior experience showing that term contract awardees turned out to be suitable for only a small number of the needs they were intended to fill. Accordingly, in my opinion, knowledge that a service will be needed by multiple recipients, or a prior practice of using term agreements, weigh against, but do not necessarily preclude, appropriate use of the exception in § 2.2-4345(A)(14).

You also ask whether § 2.2-4345(A)(14) can be used for the purpose of avoiding competition. In general, public bodies enjoy broad discretion to determine the goods or services needed, the feasibility of combining requirements, and ultimately to determine in good faith whether they need a stand-alone procurement to obtain the services needed. However, splitting a single procurement into multiple transactions for the purpose of avoiding the statutory limitations in § 2.2-4345(A)(14) is not authorized. The VPPA has a number of purposes, one of which is "that competition be sought to the maximum feasible degree."[13] A purpose of the VPPA and its exceptions is to tailor competitive process requirements to the nature of the goods or services needed by a public body. The availability of exceptions is not intended as authorization for public bodies to alter their determination of needs in order to manipulate the competitive process to be followed.[14]

Turning next to the bulk procurement limitation, § 2.2-4345(A)(14) provides in part: "Contracts for the bulk procurement of goods or services for the use of recipients shall not be exempted from the requirements of § 2.2-4303." You ask for an interpretation of this requirement and whether "bulk" refers to any number greater than an individual recipient.

The VPPA does not define "bulk" or "bulk procurement." An important principle of statutory construction is that "words in a statute are to be construed according to their ordinary meaning, given the context in which they are used."[15] In ordinary usage, "bulk" refers to a large quantity of material.[16] It does not refer to the number of recipients but rather the quantity procured. Although "bulk" ordinarily refers to physical material, in the context of § 2.2-4345(A)(14), it clearly refers also to a large quantity of personal services for direct use by the recipients of the programs identified in that section.[17]

Because personal services are not identical to one another in the same way that physical goods may be, § 2.2-4345(A)(14) requires evaluation of whether multiple services are of the same type for purposes of "bulk procurement." This limitation in § 2.2-4345(A)(14) should be applied in a manner that promotes its apparent purpose of requiring compliance with the VPPA's competitive process requirements when large enough quantities of some type of service are procured. Therefore, contracts should be viewed as procuring some type of personal service in bulk if the nature of the personal services and billing method make it feasible to procure them satisfactorily as a single type of service, and the volume is high enough to expect price or other concessions compared to what is offered on a "retail" basis.[18]

Conclusion

Accordingly, it is my opinion that § 2.2-4345(A)(14) removes the VPPA's competitive process requirements when public bodies need a stand-alone procurement for delivery of services directly to an individual recipient under the CSA, and the volume of such service acquired by the public body is not so high as to warrant an expectation of price or other concessions. Public bodies enjoy broad discretion to determine in good faith the goods or services needed and the feasibility of combining the direct personal service needs of multiple participants, but arbitrarily splitting a single procurement into a series of single purchases for the purpose of avoiding the statutory limitations of § 2.2-4345(A)(14) is not authorized. When the exception in § 2.2-4345(A)(14) applies, the CSA still requires some method of assuring that the rates agreed to are determined by competition of the market place, but the formal process of competitive negotiation or competitive sealed bidding need not be used.

With kindest regards, I am

Very truly yours,

Mark R. Herring
Attorney General

[1] VA. CODE ANN. §§ 2.2-5200 through 2.2-5214 (2014 & Supp. 2016).

[2] See § 2.2-5214 (Supp. 2016).

[3] See id.; see also § 2.2-5206(7) (Supp. 2016) (directing community policy and management teams to establish procedures for obtaining bids on the development of new services).

[4] Sections 2.2-4300 through 2.2-4377 (2014 & Supp. 2016).

[5] See §§ 2.2-4302.1 (Supp. 2016) (process for competitive sealed bidding) and 2.2-4302.2 (Supp. 2016) (process for competitive negotiation).

[6] See, e.g., § 2.2-4343(A)(9)-(12) (Supp. 2016) (exempting, or providing a process to exempt, certain local government entities from most of the VPPA).

[7] Section 2.2-4345(A)(14) (Supp. 2016). No opinion is expressed about whether the local public body that you represent has met the prerequisites to exempt itself from the VPPA and § 2.2-4345(A)(14).

[8] See § 2.2-4303(A) (Supp. 2016).

[9] See § 2.2-5214. The CSA directs the State Executive Council for Children's Services to approve a service fee directory. See id.; see also § 2.2-5200(8). An appropriate approval process could assure that rates were determined by competition of the market place. But the currently-posted service fee directory recites that its content "was supplied by ... the service provider. It has not been ... evaluated ... by the Commonwealth and its listing in this directory does not constitute ... approval ... of the ... fees by the Commonwealth." See OFFICE OF CHILDREN'S SERVICES, Service Fee Directory, available at http://www.csa.virginia.gov/sfd/service_fee_directory.cfm, (last visited April 4, 2017); see also § 2.2-5206(7) (directing community policy and management teams to establish procedures for obtaining bids on development of new services).

[10] See § 2.2-4345(A)(14).

[11] In general, therapy delivered directly to a program recipient qualifies as personal service for direct use by a program recipient. This is in contrast to consulting reports about an individual, which are procured for delivery to a public body to help the public body carry out its responsibilities pertaining to that individual. This Opinion expresses no conclusion about whether services mentioned in your inquiry are for direct use of program recipients.

[12] Typical procurement planning includes developing awareness of opportunities to combine requirements where feasible. Combining purchases into a single, larger solicitation presents an opportunity to gain the benefits of enhanced competition, public confidence from more open procedures, and the administrative efficiency of a single procurement and contract. These opportunities appear greatest if one anticipates that the same provider may be the best choice for many individuals. Of course, public bodies that have a term contract might still later use a separate procurement, if the provider already on contract would not be the best choice to meet a particular individual's needs.

[13] See § 2.2-4300(C) (2014) (declaring "intent of the General Assembly that competition be sought to the maximum feasible degree, that procurement procedures involve openness and administrative efficiency, that individual public bodies enjoy broad flexibility in fashioning details of such competition, that the rules governing contract awards be made clear in advance of the competition, that specifications reflect the procurement needs of the purchasing body rather than being drawn to favor a particular vendor, and that the purchaser and vendor freely exchange information concerning what is sought to be procured and what is offered").

[14] Cf. id. (declaring "intent of the General Assembly ... that specifications reflect the procurement needs of the purchasing body").

[15] City of Va. Beach v. Bd. of Supvrs., 246 Va. 233, 236 (1993) (internal citation omitted).

[16] See, e.g., MERRIAM WEBSTER'S COLLEGIATE DICTIONARY, at 150 (10th ed. 1996) (defining "bulk" as "of or relating to materials in bulk" and defining "in bulk" as "in large quantities").

[17] See § 2.2-4345(A)(14).

[18] If desired, public bodies can develop specific guidance for their procurement officers' fulfillment of the "bulk procurement" limitation when procuring particular types of service. See § 2.2-4302 (2014) (providing that "[t]his chapter may be implemented by ordinances, resolutions or regulations consistent with this chapter and with the provisions of other applicable law promulgated by any public body empowered by law to undertake the activities described in this chapter").