Tuesday, May 17, 2011

Who is the Low Bidder? -- Deciding Between Tied Bids

While it doesn’t happen very often, occasionally public agencies receive identical low bids for a project.  How should an award decision be made?

Check the Requirements:  The first thing to do is assess whether there are any applicable requirements that would control how to determine the successful bidder.
  • Are there any applicable state laws that apply to your type of public agency?
  • If the project includes federal funds, are there any applicable federal regulations?
  • Are there any applicable procurement and contracting policies for your agency?
  • Do the bidding documents for the project address how to handle a tied bid?
Resort to Chance:  In the absence of any requirements or policies, the best strategy for making a decision, from my perspective, is to flip a coin, or use some other method of chance.  Establish a procedure of who will flip the coin, who will call it, etc.  Then discuss the procedure with the bidders, put the procedure in writing, and have both bidders sign a statement agreeing that the coin flip procedure is a fair one for determining who the agency should award the project to.  This helps reduce the risk of a protest.

Ask for Revised Bids:  Another strategy, although not recommended, would be to ask the tied bidders to submit new prices by a specified deadline.  Some of the negatives associated with this approach include the following:
  • Bidders may end up bidding below what their costs actually are in order to get the project, which may result in more requests for change orders as the contractor attempts to make up for a low bid. 
  • Other bidders might protest, arguing that they should be given the opportunity to also submit a revised bid price.
  • This approach essentially amounts to bid shopping by the public agency and begins to look a lot like negotiation of a bid, something generally not permitted in public bidding. 
Re-Bid the Project:  A public agency always reserves the right to reject all bids and re-solicit for new bids.  However, the prices submitted by bidders may be artificially low on a re-bid as bidders try to beat the low number, which may result in prices below actual costs, and result in increased change orders.

Select Based on Qualifications:  This could include the safety record of the bidders, their experience in performing similar work, or the satisfaction with previous customers.  The downside of this approach is that it is much more subjective, and is much more subject to protest, especially since the process was not laid out and agreed to ahead of time by the bidders.

Practical Tip:  Establish a process ahead of time for breaking a tie bid, and include it in your agency’s adopted procurement and contracting policies and procedures and in your bidding documents.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

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