Bidder Responsibility Done Wrong – Part I: Bitter Consequences for Taxpayers and Contractors

This article is the first of a two-part post concerning the Washington Bidder Responsibility Statute RCW 39.04.350. Since its enactment in 2007, this statute has sparked more debate and criticism than any other piece of legislation in my career as a construction lawyer.

On March 10 of this year, I presented a seminar on this topic at the Port of Seattle with four fellow CPARB (Capital Projects Advisory Review Board) Taskforce Members (Dan Absher, Nora Huey, Mike Purdy, Paul Szumlanski). The seminar was open to the public with seating available for over 100 people and sold out faster than a Beatles reunion concert. Thus, I thought it important to provide our readers with some resources and background should they be interested in the subject.

This anonymous quote puts the bidder responsibility issue in perspective: “The bitterness of poor quality lingers long after the sweetness of the low price is forgotten.”

Prior to 2007, public works owners had long decried the fact that no statutory vehicle existed to dissuade irresponsible contractors from bidding on public works projects. There seemed to exist a standard that if the lowest responsive bidder could post a payment and performance bond, the bidder was responsible and should be awarded the public works contract. The Bidder Responsibility statute’s purpose was to swing the pendulum in favor of the public works owners so, in a small way, they could participate in the selection of qualified contractors.

1. Elements of the Statute. The statute contains mandatory bidder responsibility criteria (criteria required of all public works contracts) and allows the owner to formulate supplemental bidder responsibility criteria. As outlined in the seminar materials, the goal in drafting an evenhanded and appropriate supplemental bidder responsibility provision is to strike a balance between two competing interests: (1) the public owner’s interest to have the public works project performed by qualified contractors and (2) the public owner’s and taxpayer’s interest to foster ample competition amongst bidders.

a. Mandatory Bidder Responsibility Criteria. By statute, for the contractor to be considered the low “responsible” bidder, a bidder must satisfy six criteria:

  • It must be registered at the time of bid;
  • It must have a current Unified Business Identifier Number;
  • It must, if applicable, have Industrial Insurance coverage, an Employment Security Dept. Number, and a Sales Excise Tax Registration Number;
  • It must not have been disqualified from bidding on any public works projects;
  • It has not been found in violation of a Washington State Apprenticeship and Training Counsel requirements for one year proceeding the date of bid solicitation; and
  • It may not have violated the offsite prefabrication reporting requirements more than once.

Most public works owners include these six criteria in the project specifications. In any case, if a public works owner were to omit these mandatory responsibility requirements in the Invitation For Bidder (IFB) and subsequently award to a contractor who failed to meet one of the bidder criteria, the bid would probably be deemed against public policy—and thus, void.

b. Supplemental Bidder Responsibility Criteria. In addition to the mandatory bidder responsibility criteria, the statute provides that public works owners may apply “relevant” supplemental criteria for determining bidder responsibility. Unlike mandatory criteria, supplemental criteria, must be included in the IFB. CPARB has provided guidelines to aid specification drafters: CPARB’s Suggested Guidelines for Bidder Responsibility Revised 1/10/08 [here]. These guidelines are currently being revised and should be available October 2011. The hottest debates concerning supplemental bidder criteria revolve around what is termed “Criterion No. 8” in CPARB’s Suggested Guidelines for Bidder Responsibility: “The completion of similar projects.” See discussion below.

c. Contractor Recourse. The statute provides that a potential bidder who takes issue with the supplemental criteria may, before the bid submission deadline, advise the public works owner of modifications to the supplemental responsibility criteria. There is no mandate in the statute that the public works owner take the bidder’s recommendation into account, but if the public works owner does consider the bidder’s recommendation, it must issue an addendum to the bidding documents to identify any new criteria.

2. Controversial Supplemental Criterion No. 8 “Completion of Similar Projects.” Well-intentioned but misguided designers and owners have, in some instances, narrowly drafted the supplemental responsibility criteria such that competition is stifled to the taxpayers’ detriment. Examples of poorly drafted criteria in this regard, cited in CPARB’s Suggested Guidelines for Bidder Responsibility [here], include the following:

“The bidder shall be skilled, having at least four (4) years of applicable experience, and regularly engaged in the general class and type of work called for in the project manual.”

Who determines whether the bidder is “skilled,” whether the contractor’s experience is “applicable,” or whether the bidder is “regularly engaged in the general class and type of work” called for? By making the criteria intentionally vague, the owner could simply select the contractor with whom they are most comfortable, regardless of price.

In another example, not taken from an actual project, specifications could provide terms of “completion of similar projects”:

“The contractor shall have performed a minimum of three (3) projects in the last five (5) years of 1,000′ or more of 24″ diameter or greater ductile iron pipe installations of 15′ or deeper.”

Suppose the contractor can meet the three (3) project requirements and the diameter requirement, but only two (2) of the projects were over 15′ in depth? The contractor has performed numerous other projects that were over 10′, but less than 15′ in depth. Is the contractor responsible? Strictly speaking, the contractor is not “responsible.” However, most owners would agree that although the contractor, technically does not meet all requirements of the solicitation, it is likely qualified to perform the work. It is that balancing that is sometimes lacking in the responsibility determination. This issue will be addressed in the next blog: When and how the responsibility decision is made.

Mike Purdy is, an active CPARB Bidder Responsibility Task Force member and co-author of the Suggested Guidelines for Bidder Responsibility. Mike is a procurement expert and renowned blogger, who frequently writes on the subject of Bidder Responsibility. His blog is an excellent resource for Bidder Responsibility questions.

For the Bidder Responsibility Workshop Materials from the 3/10/11 seminar, click here.

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