When it Comes to Bidding, Government Agencies Have Room To Maneuver
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| Persinger |
Can a bid require that materials be made in America? Do public works agencies have to accept materials that don't meet bid specifications? Can an agency adopt safety specifications, even if they limit potential project bids? As attorneys involved in public works, we have some of the answers and they might surprise you.
We decided to write partly because some suppliers choose not to meet quality, performance and safety standards and then threaten a lawsuit or otherwise attempt to level the playing field. What can public works officials do to prevent this from happening in their next competitive bid?
Most importantly, they are not required to sacrifice quality and safety concerns in order to expand the universe of potential suppliers. Municipalities and other governmental units enjoy broad discretion in establishing specifications for all aspects of public works projects, including the nature and quality of the materials. Most jurisdictions have statutes governing the competitive bidding process and courts generally will not second-guess the decisions of any authorized agency that sets materials specifications and complies with the statute for competitive bidding.
To begin this two-part series, we have answered eight of the most frequently asked questions about the bidding and specification process.
Can a government agency establish strict performance and safety specifications?
Yes. When drafting specifications for a public works project, state and local governments have the right to set standards for quality, performance and safety to promote the public interest. For example, the government agency may adopt standards established by independent testing agencies or standard setters, such as the American Association of State Highway Officials (AASHTO), or the American Society for Testing and Materials (ASTM). These are two of the most commonly used standards when drafting specifications. The municipality may promote the public interest by insisting that contractors use only those products and materials meeting the specific standards.
What if the government agency adopts safety or performance specifications that tend to limit the number of potential bidders for the project?
While competition in public works projects is a worthy goal, it must not be pursued to the detriment of public health, safety or welfare. Government agencies may establish safety and performance standards for materials used in public works projects, even if these restrictions tend to limit the number of potential bidders. In general, a municipality or other government agency is required only to give potential bidders a full and fair opportunity to supply materials that meet the applicable standard. They are not required to lower standards in order to encourage additional bidders.
Can a supplier force a municipal government to relax or eliminate safety and performance standards to encourage other bidders?
No. The law does not require a government agency to lower the bar so that suppliers of inferior products have an "equal opportunity" to win the contract. On the contrary, courts are very respectful of a local government's role in ensuring the quality and fitness of public works construction. Competitive bidding statutes simply require that the government agency open the bidding to all those who can meet the plans and specifications; they do not require the agency to adopt the "least common denominator" for quality and safety standards. To do so could reduce product durability and sacrifice public safety. That could also end up costing the public far more in the long run than might be initially saved by purchasing less expensive but inferior products.
But isn't the municipality obligated to minimize project costs?
While project cost is important, courts recognize that it is not the sole concern. Municipal governments and other government agencies enjoy broad latitude in establishing plans and standards relating to the quality, fitness, safety, capacity and performance of contractors and materials. If the lowest bidder cannot meet the standards and specifications, then the municipality is under no legal obligation to award the project to that bidder.
What happens if the specification limits the bidding to only one supplier?
In some situations, a government agency may adopt specifications such that only one company is able to provide the product. For example, a product may be protected by a patent or there simply may be only one manufacturer. In these situations, courts have permitted government agencies to adopt a more restrictive standard as long as it is rationally related to the protection of the public interest and not the result of favoritism, fraud or corruption. There will generally be more than one potential supplier of municipal and construction castings even if strong quality specifications are mandated by the bidding process.
Can the municipality specify a particular brand name?
Many competitive bidding statutes prohibit or strongly discourage the specification of brand names. The better practice is to specify the desired performance standards. If it happens that a brand name is the only product that meets the specifications, then the specification will probably be valid if it is reasonably related to the public interest as we discussed above.
Can manufacturers work with government agencies to establish material specifications?
Generally, yes. Courts have ruled that manufacturers and suppliers can persuade government agencies to adopt material specifications, even if those specifications increase the likelihood that one particular company may win the bid. Of course, a company may not engage in fraud or bribery in the specification process. To minimize concerns of favoritism, a government agency should be receptive to input from competing suppliers or from independent testing agencies or standard setters, such as ASTM or AASHTO.
Suppliers and local government should be aware of a special exemption from federal antitrust laws, which prohibit unfair competition, such as bid-rigging or price-fixing. The U.S. Supreme Court has held that the First Amendment protects the right of businesses to petition the government. This exemption protects a supplier that urges a government agency to adopt a particular specification. Government agencies themselves are generally exempt from the antitrust laws.
Can a municipal government accept material that does not meet the established specifications because the price is lower?
No. The government agency must award the contract to the lowest bidder based on the published specifications. An agency that intentionally awards a contract to a low-cost supplier who has failed to meet the specifications is subverting the very purpose of the competitive bidding process, which is to allow full and fair bidding based on published specifications that are made available to all. Once the specifications are published, the municipality must abide by them. Courts will not enforce a contract awarded in violation of the competitive bidding process. If the government agency decides to lower the bar after the bidding, then it must republish the standards and re-bid the project
In Part Two, the authors discuss when and if bidders can sue contracting agencies and provide examples related to sewer and drainage projects.
This article is not legal advice and laws and practices vary around the country and in different jurisdictions. It was prepared to help municipalities deal with specifications and supplier issues.