Construction Law Newsletter
The Use of Competitive Sealed Bidding in Construction Practice
The term “source selection” refers to the procedures by which contractors are selected to complete construction projects. “Competitive sealed bidding” is a source selection procedure frequently used under the design-bid-build project delivery method. Competitive sealed bidding is a preferred form of source selection for public construction in the United States, primarily because of its efficiency and fairness.
Benefits of Competitive Sealed Bidding
Federal, state and local governments have subscribed to the competitive sealed bidding procedure in order to further the public policy objective of affording all citizens an equal right to compete for government construction contracts. Competitive sealed bidding accomplishes the following:
- Grants all qualified contractors the opportunity to compete for government contracts
- Avoids favoritism, collusion or fraud by awarding public contracts on the basis of price alone after opening the bids publicly
- Obtains the benefits of competition for the government (i.e., securing the lowest and best prices for the work to be performed)
Public Construction Contracts
Competitive sealed bidding of public construction work is required only when dictated by law. Statutes and regulations that mandate competitive sealed bidding will also delineate whether a particular governmental agency must use that method. If so, the statutes and regulations must be consulted in order to further determine whether the particular type of construction work contemplated falls within the scope of the statute. Where both the public agency and the type of construction work are within the scope of the statute, competitive sealed bidding is the mandatory method by the contract will be awarded.
Private Construction Contracts
The private construction industry is not legally required to utilize competitive sealed bidding in the granting of private contracts. As a consequence, this method has not been as widely utilized in the private sector. Instead, the private construction industry has typically used other, more flexible project delivery methods such as construction management, “fast-track” construction or design-build.
General Procedure for Competitive Sealed Bidding
The procedural steps of competitive bidding generally proceed as follows:
- A need for construction work and the amount of available funding is determined
- After considering numerous factors, (e.g., availability of competition and timing issues) the competitive sealed bidding method is deemed feasible and practicable under the circumstances
- An invitation for the bid package is prepared, including detailed, clear and complete plans
- An advertisement for bids is placed
- In response, contractors prepare and submit bids
- Submitted bids are opened publicly
- Bids are evaluated for responsiveness to the terms of the invitation
- The responsibility of the lowest bidder to complete the contract is evaluated
- Bid prices are evaluated
- The contract is awarded by communication of acceptance of the lowest responsive bid submitted by a responsible bidder
Drawbacks of Competitive Sealed Bidding
While offering fair and efficient results in awarding construction contracts, competitive sealed bidding is not perfect. There is some inconvenience of using competitive sealed bidding and its accompanying procedural requirements since it is costly, complex and time-consuming. Further, sealed bidding statutes are rigorously enforced – generally, the terms of the contract require almost exact, or “strict compliance.” Failure to strictly comply with contract requirements could result in voidance of the contract. Another generally minor difficulty of the competitive sealed bidding method is the fact that there is significant variation among federal, state and local government competitive bidding laws. For example, the type of work covered, exemptions, and procurement procedures differ substantially depending upon the jurisdiction.
Attempt at Uniform Contract Procurement Methods
In federal procurement, the mechanics of competitive sealed bidding are defined by the Federal Acquisition Regulation (F.A.R.). As noted, the statutes and regulations governing states and municipalities are quite diverse and vary considerably. In response to this lack of uniformity among competitive bidding procedures, the American Bar Association drafted a Model Procurement Code for State and Local Governments in 1979 (the Code). In 2000, when the ABA revised the Code, 16 states had adopted it in full and several more had adopted it in part. In addition, thousands of local jurisdictions across the United States have adopted the Code, which follows, in large part, federal procurement practices.
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