A Primer on
Standards for Public Bidding
By: Brett Breitschwerdt and
Jack Rosati, Jr.
Reprinted from June 2006
ohioconstructionlaw.com
Highlights. Statutes require competitive bidding for almost all public construction projects, but the standards to use in
evaluating those bids and selecting the contractor for the job differ slightly from one project to another. Is a public owner always
required to award a project to the low bidder? There can be some confusion about the answer to that question. This article
attempts to clarify the issue and sum up, in a nutshell, the public bidding standards that apply to various projects in Ohio.
The Goal of Public Bidding
The goal behind the public bidding process is to ensure that the public gets a quality
project at minimum expense to taxpayers through a fair bidding process. To this end,
the law provides owners with discretion in evaluating, rejecting, and accepting bids.
That is the lesson of
Cleveland Construction, Inc. v. Ohio Dept. of Administrative Services (Franklin App. 1997), 121 Ohio App. 3d 372.
Different standards apply to different public entities and political subdivisions, but the law generally provides all public owners with the power to choose the contractor for their public project based on other factors besides simply who submitted the lowest dollar bid.
Which Public Entities Apply Which Standards?
Specific statutes apply to each public entity or political subdivision. Each statute establishes the standards to be followed depending on
which public authority owns the project. The following are the general rules and the most important limitations or exceptions that apply.
State Agencies. O.R.C. § 153.52 provides all state agencies with the discretion to select the “lowest responsive and responsible bidder” for each branch of work. This standard also applies to the Ohio Building Authority. See O.R.C. § 152.18.
Schools. O.R.C. § 3313.46(A)(6) (boards of education), O.R.C. § 3318.10 (Ohio School Facilities Commission), and O.R.C. § 3354.16 (community colleges), respectively, provide these entities with the discretion to select the “lowest responsible” bidder. However, school districts are also included in O.R.C. § 153.52, which requires that they—like counties, townships, and municipal corporations—award contracts to the “lowest and best separate bidder.” This appears to create an inconsistency in the law and is contained in a statute designed to provide for separate bidding of certain trades’ contracts, but as long as school districts select the “lowest responsible” bidder, they will automatically comply with the “lowest and best bidder standard,” as we explain later.
Political Subdivisions. Specific statutes provide political subdivisions with the discretion to select the “lowest and best separate bidder” for each branch of the work. This standard is contained in §§ 153.52, 307.02 and 6131.44 applying to counties; §§ 153.52, 511.12, 521.05, and 5575.02 applying to townships; § 731.14 applying to villages; and § 735.05 applying to municipalities (subject to the “home rule” exception below).
Roads. O.R.C. § 5537.07, which applies to the Ohio Turnpike Commission, provides it with the discretion to select the “lowest responsive and responsible bidder.” However, when it comes to Township Road Machinery Contracts (O.R.C. § 5549.21) or to Township Road Maintenance Contracts (O.R.C. § 5575.01), the standard is merely the “lowest responsible bidder”—without any reference to responsiveness (which would still be implied, as discussed later).
Public Hospitals. O.R.C. § 749.14 provides the board of hospital commissioners the discretion to select the “lowest responsible bidder.”
Home-Rule Exception. Charter municipalities, under the home-rule provisions of the
Ohio Constitution, may develop and enact a bidding process that differs from the process
contained in the Ohio Revised Code, as long as it does not conflict with the general laws of Ohio.
The Court of Appeals for Hamilton County recognized this in Greater Cincinnati Plumbing Association v. City
of Blue Ash (1995), 106 Ohio App.3d 608.
“Dollar Threshold” Exception. Some statutes contain dollar thresholds below which competitive bidding is not required. For example, O.R.C. § 3313.46(A), which applies to boards of education, allows purchases under $25,000 not to be competitively bid. Schools also need not competitively bid certain specific purchases, such as computer software or hardware for instructional purposes and other educational materials used in teaching, according to O.R.C. § 3313.46(B)(2).
Timing Exception. Where time is of the essence, making the project an “urgent necessity,” specific agencies may be allowed by statute to avoid or modify competitive bidding. For instance, O.R.C. § 3313.46(A) (applying to schools) and O.R.C. § 3375.41 (applying to libraries) provide such an exception in appropriate cases.
The Standards and the Courts
Public policy supports public owners having broad discretion in awarding public contracts, as
long as that discretion is exercised reasonably. As a corollary, courts are limited to the “abuse of discretion”
standard in their review of the bidding choices of public entities. The “abuse of discretion” standard
dictates that even if the court disagrees with the public owner’s decision to reject the lowest bid,
it will not substitute its judgment for the judgment of the public authority statutorily empowered to
make the award unless it finds an “abuse of discretion.” The Ohio Supreme Court made this clear in
Dayton ex rel. Scandrick v. McGee (1981), 67 Ohio St. 2d 356.
A court may find an abuse of discretion only where the public owner acted “unreasonably, arbitrarily, or
with an unconscionable attitude,” according to the Ohio Supreme Court in Cedar Bay Construction, Inc. v. City of
Fremont (1990), 50 Ohio St.3d 19. The Court of Appeals followed the same standard in
Cleveland Construction, Inc. v. Ohio Dept. of Administrative Services (Franklin App. 1997), 121 Ohio App.3d 372.
The Evolving Standards
As the statutes and cases above demonstrate, public entities are not required to select a contractor for their project based solely on the amount of the bid. This makes a great deal of sense. Does responding to a bid request with the lowest number ensure that the contractor can and will complete the job with work of sufficient quality in a timely manner? Does it ensure that the contractor has the skills to meet the specific job’s requirements? Does it ensure that the contractor has done a good job on other similar projects?
Because these issues might arise if the contract was simply awarded to the lowest bidder, the statutes require the bid be “Responsive” and the bidder be “Responsible” or “Best,” depending on the statute. The discretion of owners in evaluating bidders and awarding a contract for their public project has, at times, become a source of contention between owners and rejected contractors. The contention might be minimized if everyone involved had a better understanding of the requirement for “Responsiveness of the Bid” as well as how the “Best” or “Responsible” bidder requirement is determined under the two primary standards, “Lowest and Best” and “Lowest Responsive and Responsible.”
Responsiveness of the Bid
All statutes either explicitly or implicitly require a finding that a bid is responsive
to all material terms of the invitation for bids. Statutes that apply the “Lowest and Best”
standard have an implied requirement of responsiveness because a bid cannot be “best” if it is not responsive.
A bid is responsive if it responds to all material bid specifications and contains no
irregularities or deviations that would affect the amount of the bid or otherwise give the bidder a
competitive advantage. R.C. § 9.312(A) tells us that, as does the Court of Appeals decision in
Leaseway Centers v. Department of Administrative Services (1988), 49 Ohio App.3d 99. If the irregularity or deviation is minor and not material, the owner may waive it and deem the bid responsive as long as doing so would not destroy the competitive nature of the bids.
Challenges to an owner’s decision to accept a bid despite minor irregularities can be very fact-specific, but usually the owner’s decision will be
upheld in court. If the bid deviation is deemed material, however, the owner cannot award the project to that low bidder. Two examples applying the
respective standards explain this point:
Applying the “Lowest and Best” standard, a low bid was held not responsive and
not the “best bid” where the material date of completion was omitted in Bale Contracting, Inc. v. City of
Westerville (1982), 7 Ohio App.3d 271.
Applying the “Lowest Responsive and Responsible” standard, a low
bid was held not responsive where the bid’s price to complete the project was ambiguous.
The case was Feldkamp Enterprises, Inc. v. Geiler Company (Aug. 2, 2002), Clermont C.P. No. 2002 CVH 00792.
Such discrepancies are material and cannot be ignored because they give the bidder a competitive
advantage, making the bid non-responsive. See the discussion in
State ex rel. Akers v. Buckeye Valley Local School Dist. Board of Education (1996), 1996 Ohio App. LEXIS 6090.
Public owners may also request bids allowing for alternate specifications. As long
as all bidders have a fair chance to bid based on the same information, the owner
may choose which alternate specifications it will select after the bids are opened.
This lesson again comes from State ex rel. Akers v. Buckeye Valley Local School Dist. Board of Education (1996), 1996 Ohio App. LEXIS 6090.
Comparing “Best” vs. “Responsible” Bidders
Complementing the owner’s discretion to reject a bid that is not responsive is the
discretion to reject the bid if the bidder itself is unsatisfactory. The “lowest and best” standard
does not require the public owner to take the lowest bid if the bid is not responsive, or if, in the
owner’s broad discretion, the lowest bid is not the best bid. An important decision on
this point was Cedar Bay Construction, Inc. v. City of Fremont (1990), 50 Ohio St.3d 19.
Under this standard, the owner is permitted to make a qualitative comparison between the
lowest competing bidders, comparing prices as well as each respective bidder’s qualifications.
In contrast, the “lowest responsive and responsible” standard also allows the owner discretion,
but does not allow an up-front qualifications comparison between competing bidders. Instead, this
standard requires an independent assessment of the low bidder’s qualifications before assessing the next low bidder’s qualifications. Only if the low bidder or his bid is rejected either as not responsible or as non-responsive may the owner move to a similar assessment of the next lowest bidder. This does not mean that the two evaluations cannot occur simultaneously. Where time is of the essence (as it usually is), simultaneous evaluation of the responsibility of the two low bidders can be carried out so long as an actual comparison is not being made between them.
Ohio Revised Code § 9.312(A) sets forth examples of the type of factors to be considered in making a responsibility determination, including several of the bidder’s traits:
Other factors, so long as they are rational and announced in advance, may be utilized as well. Political subdivisions are not bound by the O.R.C. § 9.312 process unless they affirmatively adopt it.
If a public owner determines in its discretion that the low bidder is not responsible, then it must evaluate the second low bidder to determine if it qualifies as responsible. The potential for legal challenges makes it prudent for the public owner and its representatives to document the reasoning for holding any low bidder not responsible. The low bidder, after a finding of non-responsibility or non-responsiveness, should be notified of the reasons for the decision by the public owner. Typically, the notification should be given in writing and by certified mail. See O.R.C. § 9.312(A).
The Monarch decision, Monarch Construction Company v. Ohio School Facilities Commission (Franklin
App. 2002), 150 Ohio App.3d 134, is one of the most recent cases analyzing the responsibility requirement. In
Monarch, the Tri-Village School District needed to make a major renovation and addition to its educational facilities and received approval from the Ohio School Facilities Commission to receive bids for the project. Monarch Construction Company was the low bidder for the general trades work but was held not responsible by the construction manager and the owners, primarily for two reasons:
Monarch had not sufficiently completed the required site evaluation; and
Although it received a number of good evaluations on other projects, it had also received one very unfavorable recent evaluation on a similar school renovation and addition project.
When the Board rejected Monarch’s bid and granted the contract to the second lowest bidder, Monarch protested, unsuccessfully, and then sued to enjoin the construction until the Common Pleas Court could rule. The Common Pleas Court ruled against the School District and the Ohio School Facilities Commission in a decision that severely limited the owner’s discretion in the bid selection process.
That decision was quickly overturned by the Court of Appeals, however, on a number of grounds. The Court of Appeals strongly reinforced the broad discretion of owners to determine whether a contractor is responsive and responsible. The court held that the trial court was required to defer to the public owner’s discretion as long as the decision was not irrational or arbitrary. The court emphasized that it was within a public owner’s discretion to place greater weight on references of similar projects than on general quality of work references. The court also held that the trial court, in determining that the public owner abused its discretion, is limited to evaluating the information that was before the public owner at the time it decided the bidder was not responsible.
The Monarch decision outlines the broad discretion that public owners possess when choosing a
contractor for their project, and its holding is very important to public owners and taxpayers alike.
For a more comprehensive discussion of the Monarch decision, see The Court of Appeals Reverses Monarch,
Restoring Discretion to Public Bidding.
Conclusion
Understanding which standard applies to a particular project and how a public owner should analyze bids to minimize bid challenges is an important step in promoting quality projects in Ohio. Owners should carefully investigate the low bidder, always documenting what is learned, and should apply the statutory criteria uniformly to each bidder. Of course, the public agency also has other options, including rejecting all bids and re-bidding the project, but those options are beyond the scope of this article.
