Can You Negotiate a Lower Price With a Bidder If You Receive Only One Bid?

If a public agency receives only one bid on a public works construction project, and the bid amount is over the funding available, can the public agency negotiate a lower price with the bidder?

There are a lot of variables and issues to evaluate in answering this question, and the answer may be different depending on the public agency.  Here's a quick list of some issues to consider:

• Legal Authority:  What applicable laws apply to the public agency?  Is negotiation in this type of situation permitted, prohibited, or not addressed?

• No Harm, No Foul:  If there are no laws that address the ability of the public agency to negotiate the bid, a case can be made that negotiation may be appropriate.  Since there are no other bidders whose interests would be harmed by the negotiation, and the public would benefit from a lower price, it may be a decision a public agency makes to negotiate with the only bidder for a lower price

• Is It Good for the Project?  Even if the public agency decides that it is okay to negotiate with the only bidder, if may not necessarily be in the best interests of the project or the public.  If the bidder agrees to lower their price below what is financially viable for them, just to get the project, the public agency may be faced with either performance issues or additional requests for change orders to make up the difference of the lower negotiated price.

• Why Was There Only One Bid?  As part of the decision making process, the public agency should evaluate the reasons why only one bid was received.  Were the bidding documents unclear?  Was the bidding period too short?  Were the risks of the project too high?  Were there a lot of other projects bidding on the same day?  The public agency should discuss the reasons with potential bidders who chose not to bid. The answers to this question may impact whether to attempt to negotiate the bid price or re-bid the project.

• Re-Bidding the Project:  Is it likely that the public agency will receive a lower price if the project is re-advertised after addressing issues of why only one bid was received?

• Talk With Your Attorney:  The public agency should consult with its attorneys to determine the best course of action in a case like this to ensure that any negotiation is legal.

Comments:  If you have dealt with this issue in the past, I would love to hear how to handled it and why you made the decision you did.  Please either contact me or write a comment to this blog entry.

Mike Purdy's Public Contracting Blog 

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