Procurement in the Age of Disaster

While hoping for the best, we should always expect and prepare for the worst. Many governmental entities have experienced emergency management personnel and dedicated procedures in place to react to a disaster. However, these same governmental entities sometimes lack the proactive administrative measures that can be utilized to ensure proper procurement – and more importantly, secure state and federal funding – during these times of disaster. The following proactive measures can ensure your governmental entity remains eligible for state and federal reimbursement both before, during, and after disaster events.

1. Emergency Procurement Procedures.

Chapter 252 of the Local Government Code reigns over public procurement and purchasing, requiring competitive bidding for public purchases with few exceptions. Among those exceptions, called “exemptions,” are (1) a procurement made because of a public calamity requiring the immediate appropriation of money to relieve the necessity of the municipality’s residents or to preserve the property of the municipality; (2) procurements necessary to preserve or protect the public safety of the municipality’s residents; and, (3) procurements necessary because of unforeseen damage to public machinery, equipment, or other property.

These exemptions provide valuable tools for governmental entities during times of disaster, as they allow governmental entities to bypass the statutorily required competitive bidding requirements, but when seeking reimbursement from state or federal agencies, it becomes imperative that these exemptions are incorporated into procurement policies and procedures that have been approved by the governmental entity’s governing body. These exemptions allow the governmental entity to act quickly, efficiently respond to emergencies, and make purchases without the constraints of competitive bidding requirements.

When considering adopting emergency procurement procedures, at least one of the exemptions, outlined above, should trigger those procedures. These emergency procurement procedures should consider things such as:

• Procedures for emergency purchases required during normal working hours, evenings, weekends, and holidays;
• Procedures for emergency purchases required during periods of business interruption;
• Providing additional purchasing authority over-and-above that usually provided to staff and personnel; and
• Providing authority to a designated member of staff to justify and certify that every emergency purchase was necessary due to one of the conditions listed as an emergency exemption in the Texas Local Government Code.

When seeking reimbursement, state and federal agencies will require a governmental entity to produce their procurement policies and procedures as well as documents justifying purchases made that divert from the requirements contained in the Local Government Code or the governmental entity’s normal procurement policies and procedures.

2. Declaration of Local Disaster.

Section 418 of the Texas Government Code allows the governing body of a political subdivision to declare a local state of disaster. Do this. Regardless of local and state action, do this and keep renewing the declaration of a local state of disaster until the disaster has passed and the community has begun to truly recover. This declaration of a local state of disaster directly communicates to state and federal agencies that the governmental entity’s residents and the community at large still require aid and assistance.

The Federal Emergency Management Agency (“FEMA”) will eventually provide guidance as to the end of any exigent and emergency circumstances related to the disaster, but so long as the effects of the disaster can still be evidenced, there should be a local state of disaster in place.

A local state of disaster can (and should, depending on the governmental entity) include, other than the statutory requirements, a provision allowing a designated member of staff – for example, the City Manager – to forego competitive bidding procedures, as allowed by law, and enter into related contracts needed to avoid interruption in operations and to provide for the public health and safety of residents and the community at large.

3. Pre-Disaster or Pre-Positioned Contracts.

If in an area with a high occurrence of disasters, before an actual disaster occurs, a governmental entity should competitively procure contracts for goods and services needed in times before, during, and after an emergency (e.g. wayfinding services, disaster recovery services, sanitation services, provision of lodging for essential personnel). The Texas Division of Emergency Management (“TDEM”) and FEMA support the eligibility – and funding reimbursement – of pre-disaster and pre-positioned contracts so long as the governmental entity awards those contracts in accordance with federal regulations. (There’re also specific contract provisions required for all contracts awarded and potentially reimbursed by federal funds!)

4. Follow Guidance from (“TDEM”).

TDEM provides several resources to ensure that every eligible purchase made by a governmental entity will be considered for reimbursement. In its “Overview of Procurement Requirements Under the FEMA Public Assistance Program,” TDEM notes that non-compliant procurements most often result in withheld funding and de-obligation of funds from state and federal public assistance programs.

A key reason emergency procurement procedures and a declaration of a local state of disaster remain so important during an emergency is (1) due to TDEM’s opinion that public exigency or emergency will not normally permit a diversion from competitive bidding requirements and (2) TDEM requires the governmental entity to follow the governmental entity’s procurement policies and procedures. Additionally, when seeking reimbursement from TDEM or FEMA, purchasing cooperatives and buy boards do not relieve governmental entities from procurement requirements, with TDEM calling the use of buy boards “risky.” Other procurement practices deemed risky include time and materials contracts, cost plus percentage contracts, and piggy backing current contracts.

5. Insurance Claims.

A governmental entity should also prepare all insurance policies and claims related to a disaster prior to accepting funds from TDEM or FEMA. Should a governmental entity have received funds from a claim on its insurance policy, those insurance proceeds received – and the items, services, or goods they cover – will most likely be deemed ineligible for reimbursement by TDEM and/or FEMA.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our commercial and business litigation practice can be found here.