Public Bid Law Seminar

 

Reprinted by permission of Glenn R. Ducote

 

Public Bid Law Seminar

May 22, 1998

National Institute of Governmental Purchasing, Southeast Louisiana Chapter

Presented by Glenn R. Ducote
Assistant Attorney General
Louisiana Department of Justice
Richard Ieyoub, Attorney General

The Louisiana Public Bid Law, Louisiana Revised Statutes, Title 38, Chapter 10, Public Contracts; Part II, Letting Contracts; Sections 2211-2261 is applicable to:

 

• the State of Louisiana and all of its agencies, colleges and universities, only as related to public works.
• parishes, municipalities, and all other political subdivisions of the state
• the Louisiana Legislature
• the Louisiana Judiciary
• locally elected public officials sheriff, assessor, clerk of court, coroner, etc.

This law applies to contracts for public works. (38:2212A(1)(A))

• construction, remodeling, drainage structures, utilities, improvements, etc.
• demolition and removal of a structure may be treated as a service rather than a public work.

This law applies to" purchases of materials and supplies". (38:2212A(1)(a))

• this includes equipment, vehicles and all other movable property.
• it does not apply to services, professional or otherwise, regardless of contract amount.
• it does not apply to pure leases of movables, but does apply to any lease where there is an opportunity to obtain title at any time.
• it does not apply to contracts for insurance, which is considered a service.
• it does not apply to leases or purchases of real estate for offices, warehouses, etc.
• it does not apply to purchases of materials, supplies or services by the state, which are covered by the Louisiana Procurement Code, R.S. 39:1551 and following.

The law becomes applicable when monetary "thresholds" are met for a particular procurement.

• for public works the law becomes applicable when the total cost of a project, including labor and materials, exceeds $100,000.

• special provisions apply to public works by political subdivisions doing utility work. See provisions in La. R.S. 38:2212E.
• for purchases of materials and supplies the law requires the following.

Contracts for materials, supplies, or equipment which will be needed in partial deliveries through the fiscal year must be purchased through a "requirements" contract based on the estimated total value of that commodity which will be purchased during the fiscal year.

• this will apply to acquisitions such as office supplies, sand, gravel, gasoline, tires, auto parts and all commodities needed in small but recurring quantities during the fiscal year.
• certain commodities with volatile prices, such as gasoline, may require the use of an index (such as OPIS) to establish a price which adjusts with market conditions. "Cost Plus" contract arrangements generally cannot be used in public procurement. A "percent off catalogue price" bid may be used for items like auto parts and office supplies.

Advertising of a bid solicitation is required once a procurement meets the above bid thresholds.

• advertising must appear in the local newspaper which serves as the official journal for your public entity.
• specifications must be available on the date of the first advertisement.
• ad must indicate where the detailed specifications may be obtained and when and where bids will be received and opened.
• advertising for purchases must be published at least twice, beginning at least 15 days before bids are to be received.
• advertising for public works must be published at least three times:

   

  beginning at least 30 days before bids are to be received for projects estimated by your licensed design professional to cost over $500,000;

  beginning at least 25 days before bids are to be received for projects estimated by your licensed design professional to cost under $500,000;

• advertising is the only notification requirement of the law, but to encourage competition, specs and bid forms should be mailed to all known area vendors of the commodities sought. Calls or written notices to prospective contractors for public works bids may help enhance your competition.
• Contracts can be awarded in emergency situations without advertising for bids; notice of the declaration of an emergency must be advertised in the official journal within 10 days after the declaration. See the strict definition of emergency in R.S. 38:2211A(6).

Telecommunications and Data Processing equipment, software and related services may be purchased either by public bidding or by means of a Request for Proposals (RFP).

• advantages of a RFP
• disadvantages of a RFP

The Public Bid Law gives great emphasis to the requirement that open specifications be used in soliciting bids for purchases or for public works. R.S. 38:2212F9(2) emphatically provides:

 

Whenever in specifications the name of a certain brand, make, manufacturer, or definite specification is utilized, the specifications shall state clearly that they are used only to denote the quality standard of product desired and that they do not restrict bidders to the specific brand, make, manufacturer, or specification named; that they are used only to set forth and convey to prospective bidders the general style, type, character, and quality of product desired; and that equivalent products will be acceptable. It shall be the responsibility of the professionally employed architect or engineer to determine what is considered an equivalent product on any and all projects in which he has been legally employed to perform his professional services.

 

To this legislative mandate, our Supreme Court has recently added:

 

The number of alternates allowed in specifications is limited to three - no matter what these options are called. Alternates, if accepted, must be accepted in the order listed on the bid form, unless going out of order has no effect on determination of the low bidder.


All public works contracts must authorize Change Orders.

• the Attorney General has taken the position that a delete change order executed contemporaneously with the contract may be used to bring the low bid within funds available for the project.
• there is no dollar or percent limitation on the size of a change order. Any change order must be “within the scope of the contract”.

Opening of Bids must be done at the time and place indicated in advertisement.

• need not be done before the governing body unless required by your local ordinances or procedures.
• bids not received by the appointed time cannot be considered and should not even be opened; they should be marked with the time received and returned to the bidder unopened.
• sealed bids must be publicly opened and read aloud, if feasible.
• bids are public records and are subject to inspection and copying, but some precautions are suggested to avoid tampering; the Public Records Law (R.S. 44:1-37) requires availability within 72 hours of a written request.
• no comment should be made at bid opening about the apparent low bid or about bid award.
• award and purchase order or contract document should be entered only after careful review of apparent low bidder’s responsibility and responsiveness.

Waiving Informalities. The statute provides: "The provisions and requirements of this Section, those stated in the advertisement for bids, and those required on the bid form shall not be considered as informalities and shall not be waived by any public entity." That does not leave much that can be waived, although a court recently held that "a public entity may waive deviations that are not substantive in nature." Boh Bros. v. DOTD, 1st Cir. 1997) 698 So.2d 675.

This is a bad decision and is likely to lead to additional limits on discretion by new legislation.


Withdrawal of Bids:

• a bid may be withdrawn by the bidder because of "patently obvious, unintentional and substantial mechanical, clerical, or mathematical errors, or errors of unintentional omission of a substantial of work, labor, materials or services...” but only if done by affidavit within 48 hours of bid opening. The very specific requirements of R. S. 38:2214C must be complied with to avoid violation of the constitutional prohibition against giving away public property.

Cancellation of a Solicitation:

• a bid solicitation may be canceled by the public entity once bids are opened only for “just cause”. 38:2214 provides illustrations of some reasons for public works. The recent Rosenbush case (653 So.2d 538, La. Supreme Court, 1995) limits these options with this holding:
  
  The present LSA-R.S. 38:2214 and 38:2215 should be interpreted together to provide that a public entity has 30 days to do one of the following: (1) award a contract to the lowest responsible bidder; (2) reject all bids for just cause; or (3) extend the deadline by mutual consent with the lowest responsible bidder. In the present case the City did none of these. Since the City failed to comply with its obligation to award the contract within the 30 day period, a mandamus action to compel the public entity to award the contract to the lowest qualified bidder was justified. At this point, the City could not avoid its ministerial duty by trying to change the basis of the contract from “administrative services” to “professional services” and readvertise for bids; the 30 day period in LSA-R.S. 38:2215 had already expired; it was simply too late.

Bid Bonds and Performance Bonds:

 

The surety for either bid or performance bond must be on US Treasury list or be a Louisiana domiciled company with at least an "A-" Best rating. This is to help assure that you have a solvent surety if your contractor fails to perform.

 

• All Public Works Contracts in Excess of $5,000 must Be Reduced to Writing and Recorded with the Clerk of Court.
• All public works contracts in excess of $25,000 must have a performance/payment bond for at least 50% of the contract amount. You may choose to require a performance/payment bond on jobs under $25,000. (Note: Contract limit changed in 1999 Regular Session of the Louisiana Legislature from $100,000 to $25,000)
• Bonds, once given to the public entity, are a property right of the public and the failure to execute on a bond according to its terms is a gift of public property in contravention of the Louisiana Constitution.

Responsibility and Responsiveness:

• Responsibility deals with whether the bidder is someone with whom you want to do business are they solvent, licensed, equipped; have they performed satisfactorily for you and for others in the past.
• Responsiveness deals with whether the bidder has offered you what you asked for.
• The decision in the Haughton Elevator case, 367 So.2d 86, La. Supreme Court, 1979, and R.S. 38:2212J require that when a public entity challenges the responsibility of a bidder, an opportunity for a due process hearing must be provided.
• An unresponsive low bidder must be given timely notice of the reason the bid was found to be unresponsive, but no hearing is required.
• The failure to attend a mandatory pre-bid conference is grounds for disqualification of a bidder. However, notice that there will be a mandatory pre-bid conference must now be included in the advertisement for bids.

Preferences:

• We no longer have an outright preference provision in our law for public works contracts. R.S. 38:2225 does not require that if an out of state bidder is low, a Louisiana bidder may be given the job if the home state of the out-of-state bidder gives him a preference in his own state, and the Louisiana bidder is within the margin of that state’s preference for its own state bidders. This is referred to as a reciprocal preference.
• Preferences for purchases appear in R.S. 38:2251-2261. The primary statute is Sec. 2251 which provides that for foodstuffs and paper a public entity must grant to a bidder offering a product grown, manufactured, processed, produced or assembled in Louisiana a 7% price advantage over products which are not grown, manufactured, processed, produced or assembled in Louisiana. This is mandatory.
• With regard to all products other than foodstuffs and paper, the public entity may choose to allow a bidder offering a product manufactured, processed, produced or assembled within Louisiana, whose price is within 5% of the low bid price, to receive the award if the vendor of the Louisiana product is willing to provide it at the low bid price. This is optional.

Illegal Procurement Practices:

• R.S. 38:2220 provides that any contract subject to the Public Bid Law and entered into without complying with the Public Bid Law is null and void. This should be enough cause for alarm to both the vendor and the public entity.
• The District Attorney and the Attorney General are given " surveillance authority" and the right to bring enforcement actions for breaches of the Public Bid Law and to seek injunctions against violations. Any tax payer (usually a disgruntled bidder) may also seek injunctions and other appropriate actions to nullify violations.
• When the DA or AG seeks enforcement actions, the court may award a civil penalty of up to $50,000 against public officials who authorized the violation.
• Several recent court decisions indicate that an aggrieved party must file suit for injunction in a timely fashion once he knows of or should have known of facts supporting a violation of the law. One can’t wait until the contract has been performed and then say that the award should have been made to someone else and now claim lost profits, etc. for a bidder who did not get the contract.
• When a court finds that a contractor improperly awarded a contract acted in good faith, the contractor will be allowed quantum meruit, that is payment of his out of pocket expenses, without profit or overhead. If the contractor was not in good faith, having collaborated in what was known to be an illegal award, he will not be allowed any proceeds under the contract, and may be subject to a claim for damages from the bidder who should have received the award.

Procurement Alternatives:

• Purchases may be made from state procurement contracts, which may be available, without the necessity of bidding. R.S. 39:1702.
• Under a provision of the Procurement code, R.S. 39:1710, political subdivisions may buy items which are available on state contract and buy from a local vendor. It must be precisely the same item with the same specifications as the state contract item. The local vendor may be paid 3% - 7% over state contract price for handling and transportation and delivery. You may often be able to buy the product at state contract price or below.
• Purchasing can be done jointly with other political subdivisions or purchase can be made under an available contract entered by another Louisiana public entity. See R.S. 33:1321 and following.
• Political subdivisions may adopt the La. Procurement Code to govern their procurement. Must still use the Public Bid Law for public works.
• Both Congress and the Louisiana Legislature enacted legislation authorizing state and local government to purchase off of federal GSA contracts. However, the Republican congress has halted this reform.

Reprinted by permission of Glenn R. Ducote