Negotiating with the Low Bidder

May a public agency in the State of Washington negotiate with the low bidder on a public works project if their bid is too high?

Yes, a “state contracting authority” may do so under certain circumstances. The term state contracting authority applies to stage agencies and not municipalities, cities, counties, port districts, housing authorities, etc. – unless the Legislature amends RCW 39.04.015 during the 2009 Legislative session.

At the July 10, 2008 meeting of the Capital Projects Advisory Review Board (CPARB), public owners proposed by this law be revised to expand its use to all other government agencies in Washington State. CPARB will continue its discussion of the proposal and may or may not vote to make such a recommendation to the Legislature. There is opposition to such a measure from subcontractors, labor unions, and the bonding industry

RCW 39.04.015 provides that a state contracting authority may negotiate with the low bidder on a public works project, based “upon agreed changes to the contract plans and specifications” when the bid exceeds the available funds. In addition, the amount of the bid exceeding the available funds must fall within the following specified thresholds:

• 5% for projects valued under $1 million

• The greater of $50,000 or 2.5% for projects valued between $1 million and $5 million

• The greater of $125,000 or 1% for projects valued over $5 million

Finally, such negotiation must result in the contract amount being within the available funds.

There is one other bid negotiation law for public works projects available in Washington State law that affects not public agencies but General Contractors/Construction Managers (GC/CMs) on public projects. Like RCW 39.04.015 discussed above, RCW 39.10.380 (6) provides a formula basis for when the GC/CM may negotiate with a subcontractor on a publicly advertised subcontract bid package under the GC/CM project.