Tuesday, September 30, 2014

Proposed NJ Law Would Require Disclosure of Construction Bidders Lists

The New Jersey Assembly has passed a bill that would require local public agencies to publicly disclose the names of possible bidders on public construction projects.  Currently, such disclosure is voluntary.

Disclosing names of potential bidders:  Bill A947 would require local public agencies to make public (if requested) the names of parties who have received a copy of bid documents, once three or more parties have received the documents.  Failure to do so would prohibit the public agency from accepting bids, and the project would have to be readvertised.  Agencies could also comply with the proposed law by publishing the names of potential bidders (parties picking up a set of the bid documents) on the agency’s website. 

Legislative support:  The bill passed the Assembly on June 23, 2014 by a 59-16 majority.  It has been sent to the Senate Community and Urban Affairs Committee (S2216).  Deliberation in the Senate could occur any time during the next 16 months.

Support for the bill:  A947 is being promoted by state labor groups and small businesses who argue that knowledge of potential bidder identities prior to the bid submission deadline will allow small businesses (particularly women and minority owned businesses) to “have timely access to bidders on public projects so that they can submit subcontracting bids to those bidders for the purpose of enabling those bidders to put together their lowest possible bids to the benefit of the local contracting unit.”  

Opposition:  Local governments oppose the change as, in their view, such forced disclosure may contaminate the sealed bidding process and lead to bid-rigging and collusion.  There is also concern that overall costs will increase due to litigation.

Precedents:  There are a number of public agencies in New Jersey where public disclosure of the bidders list is standard practice.  However, there is no set number of bid document recipients to trigger disclosure.  Also, in a closely related New Jersey court case (O’Neill Electric Co., Inc. v. theBoard of Chosen Freeholders of the County of Warren, 1997), the NJ Appellate court ruled that such required disclosure of the bidders lists would “facilitate collusive or bid-rigging arrangements” and not be in the public’s best interest.

Additional information:  The following links provide more information about this issue:

  • A947 – Text of the bill that passed the New Jersey Assembly
Should list of potential bidders be disclosed?  Different public agencies clearly have different practices on this issue.  Generally, I think it is best practice that public bidding be a transparent process.  This would suggest making the bidders lists available publicly.  However, in regions where this practice may encourage collusion, it may be wiser not to disclose the names of firms who have picked up the bid documents. 

Should number and names of bidders be disclosed?  Beyond the issue of the bidders lists, in order to prevent collusion and inflated prices, public agencies should not disclose the number of bids that have been received or the names of the bidders who have submitted bids.  It is at this point, rather than simply the names of bidders who have picked up bid documents, that collusion and inflated prices are more of a risk.  Some bidders are known to arrive at the bid submittal location with two bids and they submit one bid based on their competition.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC

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