Monday, April 8, 2013

When Can a Public Agency Reject All Bids?

Most public construction bid documents include language reserving the right of the agency to reject any and all bids.  But when can or should this be done (and not done)?

Valid reasons to reject all bids:  The following is a list of some of the reasons why an agency might choose to reject all bids:
  • All bids are above the amount of money available for the project.
  • The low bid is within budget but is non-responsive, and the other bids are above the amount available in the budget.
  • There is a bid protest based on mistakes or ambiguities in the specifications and drawings.
  • The low bid is materially unbalanced to the potential detriment of the agency, and the agency realizes that the bid documents are unclear about quantities or how the work will be performed.
Invalid reasons to reject all bids:  The following is a list of some less than good reasons for rejecting all bids (and for bidding in the first place):
  • The agency didn't perform an estimate of the construction cost and was just using the bid process to get estimates from contractors.  In many cases, preparing an estimate is required prior to bidding, and is always a good practice.  Bidding should not be used as a cost estimating procedure.
  • The agency always intended to perform the work with their own crews if bid prices came in above a certain amount.  Again, the bidding process should not be used as a cost estimating procedure.
Contractors' perspective:  It costs contractors time and money to prepare bids, and the bidding process should only be entered into if there is an intention to award a contract to a responsible bidder with the low responsive bid that is within the amount of money available in the budget.  In some jurisdictions, there has been discussion by contractors to obtain legislation to limit the ability of public agencies to reject all bids because of abuses by some agencies.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC

1 comment:

Steve Goldblatt said...

Mike, See WA's attempts: SB 6669 (2004: only for “good cause”), HB 1444 (2005: only for “good cause”), HB 1292 (2005: compensate low bidder), and SSB 6509 (2006: only for “compelling reason”).