Setting the Bar

Each year, Elwood Davis and his staff spend more than $8 million to maintain 1,025 miles of streets in Raleigh, N.C. From asphalt and chain saws to storm drain tops and dump trucks, the public works team searches for the best prices for the products and services they need to keep traffic moving smoothly. Before sending out requests for bids, though, Davis reviews and approves a set of product specifications. “We have to spend the taxpayers’ money wisely,” says Davis, street superintendent. “Our purchasing department wants at least three quotes. When products are equal, it’s easy to do. When you have quality issues, though, sometimes you have to justify going with the product that’s a little more expensive, especially if it saves money in the long run.”

Competitive bids are designed to level the playing field, giving all interested and qualified vendors a chance to bid for public works projects. By publishing specifications before asking for bids, project managers ensure that all vendors have equal knowledge and that no one has an unfair advantage. That also can defend them from lawsuits threatened by contractors who are not selected.

“Municipalities and other governmental units enjoy broad discretion in establishing specifications for all aspects of public works projects, [including] the nature and quality of the materials and contractors to be utilized, as well as standards for safety and quality,” says Steve Waterbury, a partner at Warner Norcross & Judd, a Grand Rapids, Mich.-based law firm. “Courts generally will not second guess the decisions of any authorized agency that sets material specifications and complies with the statute for competitive bidding.”

Many local governments adopt independent testing agencies’ standards when drafting specifications for public works projects. The standards cover a range of issues from materials, tolerances and proof-load testing to certifications, markings, records and inspections.

As a general rule, cities and counties are required to give potential bidders a “full and fair opportunity” to supply materials that meet applicable specifications, but they do not have to lower standards to encourage a broader field of bidders, Waterbury says. “The law does not require a government agency to lower the bar so that suppliers of inferior products have an equal opportunity to win the contract,” he says. “Competitive bidding statutes simply require that the government agency open the bidding to all those who can meet the plans and specifications. They do not require the agency to adopt the least-common denominator when it comes to quality and safety, [which] could reduce product durability and sacrifice public safety. In the end, the project could cost far more than might be initially saved by purchasing less expensive but inferior products.”

Cost, quality and performance

Trial and appellate courts have helped shape what local governments should and should not do when soliciting bids.

• Specifying brand names is discouraged or prohibited. Competitive bidding statues often steer public works officials away from naming specific brands. Instead, Waterbury recommends identifying the desired performance standards.

• Specifying American-made materials is permitted. Many state and local government laws promote products manufactured in the United States for use in public works projects. In fact, federal law requires using the products for any highway project that accepts federal funds.

• Giving preference to local vendors is acceptable. Most states have enacted laws giving some preference to in-state or local vendors, and state and federal courts have upheld preferential-treatment statutes, Waterbury says.

• Cost is an important factor but not the sole concern. Public works departments are obligated to minimize project costs but not if it means sacrificing quality, fitness, safety or performance. If the lowest bidder cannot meet the standards and specifications, the city or county is “under no legal obligation” to award the project to that bidder, Waterbury says.

Bill Dooley, public works director for Wyoming, Mich., now prequalifies prospective contractors before all construction projects so he and his team can feel confident that “prospective bidders will have the economic ability and skill to fulfill the contract” if they are chosen. “If you prequalify contractors and materials suppliers beforehand, you can award the bid to the lowest bidder without problems,” Dooley says. “If you put it out there and you have an issue with the quality of a contractor, you might have difficulty explaining to your city council why you are choosing to award the bid to someone other than the lowest bidder.”

He recommends being very specific about the types of materials to be used or avoided, as well as capacity and performance. Using specifications that already have been drafted by neighboring municipalities can save time, work and money. “Specifications are really important,” Dooley says. “There are new products that manufacturers are coming up with all the time. For example, plastic water main pipe is now readily available and it costs less. But when we look at the long-term costs, we believe that ductile iron is the better long-term solution for our city. We require that in our construction bids and are very specific.”

Jim Olson, materials coordinator for the Denver Water Board, and his crew take prequalifying a step further by testing new products — from fire hydrants to mechanical valves — in-house. After a product passes rigorous screening procedures, it is then field tested for six to 12 months before Olson adds it to the city’s engineering standards.

Olson says that vendors have a love-hate relationship with the process. “We don’t do things on a handshake any more,” he says. “You’ve got to make sure these products work. You have to be knowledgeable. Ending up in a legal battle with a manufacturer would not be in my best interest.”

Avoiding lawsuits

Government agencies must award the contract to the lowest bidder based on the published specifications, Waterbury says. Local governments cannot, therefore, accept materials that do not meet the established specifications simply because the price is lower. “Once specifications are published, a municipality must abide by them,” he says. “If the agency decides to lower the bar after the bidding, it must republish the specs and re-bid the project.”

To do otherwise, he explained, is to invite a lawsuit. Rejected bidders could sue the city or county to nullify the contract and recover monetary damages. Individual taxpayers also can sue to prevent a government agency from awarding a contract in violation of published specifications. There is also the possibility of lawsuits after the project completion if the materials used are defective or substandard. “Municipal governments are often sued when they buy or approve construction materials that turn out to be faulty,” Waterbury says. “Even if the government agency is not held liable, it may have to spend millions of dollars defending lawsuits.”

Lawsuits are precisely what drove Greensboro, N.C., to tighten up its specs in 2001, according to Engineering Specialist Robbie Bald. After the city’s long-time domestic foundry supplier went out of business in the 1990s, Bald and his colleagues began to notice quality problems with the replacement products they were purchasing that were manufactured in India. “We started to have problems with substandard castings because the tolerances were not being held to,” Bald says. “We had lids being hit by cars, flipping up and leaving sewers exposed. Then, others would drive through, and it would completely ruin their cars. We had multiple cars damaged in a single incident, and we were racking up some pretty significant insurance claims.”

As insurance payouts climbed over $200,000, Bald and his colleagues fixed the problem by rewriting the specifications of their manhole rings and covers, tightening the tolerance from one-eighth of an inch to one-thirty-second of an inch and adding additional iron to increase the weight.

Greensboro, a town of 250,000, worked with several foundries to redesign the manhole covers so they would be less likely to flip if they came loose. At the same time, the state passed a law requiring that all castings used in state-maintained roads had to be domestically manufactured.

Bald says that Greensboro has had no claims on any of the new rings and covers since they have been installed, and the city is steadily replacing more than 2,600 storm and sanitary sewer rings and covers. “We made announcements to our suppliers ahead of time, giving them our new specs and requirements so that we didn’t have suppliers sitting on large inventories of rings and covers,” Bald says. “We didn’t give any thought to revisions eliminating competition. We were in it for what was the best product for us.”

Courts have upheld the rights of government agencies to adopt specifications that may limit the number of companies able to bid, Waterbury says. “For example, a product may be protected by a patent, or there simply may be only one manufacturer,” he says. “In these situations, courts have permitted government agencies to adopt a more restrictive standard as long as it is rationally related to the protection of public interest and not the result of favoritism, fraud or corruption.” A system that encourages suppliers to compete for public works business is a “worthy goal, [but] it must not be pursued to the detriment of public health, safety and welfare,” he says.

Mary Ann Sabo is a Grand Rapids, Mich.-based freelance writer.

10 tips for writing good specs

1. Write specifications that protect the public by requiring quality materials, products and vendors.
2. Reference national performance specs.
3. For ease of replacement, require that castings be interchangeable with the ones currently in use.
4. Reference state department of transportation standards.
5. Get feedback from maintenance department employees on prospective suppliers and products.
6. Reference an approved supplier list from the state’s department of transportation.
7. Secure certifications from manufacturers, not distributors.
8. If federal dollars are involved, American-made products must be purchased.
9. Upgrade specs to eliminate low-quality suppliers.
10. Award the bid to the lowest bidder who meets the written specifications.
    — East Jordan Iron Works, East Jordan, Mich.