"Steakhouse Deal" - Negotiating with the Low Bidder

In the Washington State Auditor's report on construction management practices at the Port of Seattle, the auditor found that the Port improperly negotiated a lower bid price with the sole bidder on its 3rd Runway project. In its front page story this morning, the Seattle Times detailed how the Port had initial discussions with the bidder at a steakhouse near the airport to negotiate a lower bid.

There is one exception in state law that does permit negotiating with the low bidder on a public works project, but that exception only applies to "state contracting" agencies, not to port districts or other jurisdictions. RCW 39.04.015 permits bid negotiation under certain circumstances: all bids exceed the available funds, the low bid does not exceed certain thresholds, and negotiating the bid would bring the price in line with available funds.

Below is the language of RCW 39.04.015:

"Notwithstanding the provisions of RCW 39.04.010, a state contracting authority is authorized to negotiate an adjustment to a bid price, based upon agreed changes to the contract plans and specifications, with a low responsive bidder under the following conditions:

(1) All bids for a state public works project involving buildings and any associated building utilities and appendants exceed the available funds, as certified by the appropriate fiscal officer;

(2) The apparent low responsive bid does not exceed the available funds by: (a) Five percent on projects valued under one million dollars; (b) the greater of fifty thousand dollars or two and one-half percent for projects valued between one million dollars and five million dollars; or (c) the greater of one hundred twenty-five thousand dollars or one percent for projects valued over five million dollars; and

(3) The negotiated adjustment will bring the bid price within the amount of available funds."