Bid Requirements for Public Projects Under the Iran Economic Sanctions Act of 2012

On December 28, 2012, Governor Snyder signed Public Act 517 of 2012 ("Iran Economic Sanctions Act"). Beginning April 1, 2013, an "Iran Linked Business" is not eligible to submit a bid on a request for proposal with a public entity, including state agencies, school districts, community colleges, intermediate school districts, cities, villages, townships, counties, and public authorities.

The Act defines an Iran Linked Business as an individual or any entity, including all successors, parent companies, subsidiaries, and companies under common control, engaged in investment activities of $20,000,000.00 or more with the energy sector of Iran, including providing of products used to construct or maintain oil or liquefied natural gas pipelines.

The public entity must require that all individuals and entities that submit a bid on a request for proposal certify that they are not an Iran Linked Business. If a public entity determines, using credible information available to the public, that an individual or entity has submitted a false certification, the public entity must provide written notice of its determination and intent not to enter into or renew a contract.  The notice must include information on how to contest the determination.  The notice must also specify that the individual or entity could become eligible for future contracts with the public entity if the activities that caused it to be an Iran linked business are ceased.

The Act provides that an individual or entity has 90 days following receipt of notice to respond in writing to demonstrate that the determination of false certification was made in error. If the individual or entity does not make that demonstration within 90 days after receipt of the notice, the public entity may terminate any existing contract, at the option of the public entity, and must report the name of the individual or entity to the Attorney General together with information supporting the determination.

The Attorney General may bring a civil action against any individual or entity reported to have submitted a false certification. There is no requirement that the false certification was made knowingly or willfully. If the civil action results in a finding that certification was false, the person or entity will be responsible for a civil penalty of not more than $250,000.00 or two times the amount of the contract for which the false certification was made, whichever is greater. In addition to the fine, the individual or entity will be responsible for the cost and reasonable attorney fees incurred by the public entity.

An individual or entity who has submitted a false certification will be ineligible to bid on a request for proposal for 3 years from the date the certification was determined to be false.

If you have any questions regarding the Iran Economic Sanctions Act and the required certification, or any construction law issues, contact Brian P. Lick or another member of Clark Hill's Construction Practice Group. Brian P. Lick may be contacted at (517) 318-3058 or blick@clarkhill.com .