State statutes subject most school-related contracts to competitive bidding procedures designed “‘to prevent favoritism, to secure honest methods of letting contracts in the public interest, to obtain the most favorable price, and to treat all persons equally.’” One noticeable exception is that contracts for professional services, such as construction management, are usually not subject to competitive bidding due to the unique services they involve. Further, some states, such as Ohio, are free to exclude specified purchases from competitive bidding, such as “motor vehicles except school buses; insurance, fuel, and textbooks.”
Bidding laws typically require boards to award contracts to the “lowest responsible bidder,” as in Illinois and Pennsylvania, or the “lowest and best bidder,” as in Ohio, which uses both terms. Because courts usually interpret statutory and contractual bidding provisions strictly, it is long-established that non-conforming bids are ordinarily unenforceable.
Because courts generally treat prerequisites such as descriptions of bidders’ qualifications and past performance as mandatory, the Fifth Circuit allowed a board to disqualify a firm from bidding for failing to comply with the call for bids.
Courts have the discretion to permit parties some flexibility in modifying contracts if the changes are not so extensive as to amount to abandoning original agreements and entering into new ones.
If items are absent from the lowest bids, courts generally allow them to be accepted if bidders provide the missing information before the parties sign contracts. For example, the Supreme Court of South Carolina affirmed that a low bidder could correct a sealed bid on a $16,000,000 construction project to add $613,000 for work on a roof because the board’s procurement requirements only forbade corrections that caused bidders to have the low bids.
The court noted that the successful bidder had the low bid both before and after the correction, based on the same specifications as three competitors. However, courts ordinarily do not allow bidders to change their offers once their sealed bids are opened, as this would preserve fair treatment for all, because once opened, they are generally considered public records.
After school boards accept, or try to accept, mistaken bids, disputes arise when bidders
refuse to be bound by the terms of their agreements. Mistaken bids are covered by the general rule of contract law that individuals or boards cannot accept bids or offers if they knew, or reasonably should have known, that they were mistaken.
When a clerical error led a firm to bid more than 10% less than it should have, four days after the board accepted its bid, company officials sought to withdraw the bid. In an admittedly older case, the Supreme Court of Nebraska affirmed that the firm could withdraw because the only loss the board would have suffered was the gain it sought to acquire by taking undue advantage of the bidder.
being accepted, boards can cancel them and free bidders from contractual liability. Moreover, if
boards have set procedures governing the withdrawal of mistaken bids, bidders must comply with these provisions, such as where officials of a public school building authority adopted a policy permitting parties to withdraw bids if company representatives personally appeared with written requests before their being opened.
The Supreme Court of Pennsylvania refused to allow a company that had a bid much lower than others to withdraw simply by sending an unverified telegram. The court thought that allowing the bidder to withdraw without following the set procedures could have led to fraudulent conduct between bidders and public bodies.
Under contract law, neither party can unilaterally avoid its contractual obligations, as this requires mutual consent. While parties can agree to modify or amend their contracts, this principle is generally inapplicable to board contracts under competitive-bidding laws. Still, situations can arise wherein the public interest may be best served by allowing boards and bidders to agree to limited contractual modifications.
Courts have the discretion to permit parties some flexibility in modifying contracts if the changes are not so extensive as to amount to abandoning original agreements and entering into new ones. For instance, an appellate court in Illinois affirmed that when a board acted in good faith in agreeing to contractual changes based on new data, its intervention was unwarranted. Conversely, where a board and its electricity provider extended the contract term period applicable to competitive procurements, an appellate panel in Texas affirmed that their agreement was invalid and unenforceable because it exceeded the duration allowed in state law.
When dealing with competitive bidding statutes, SBOs and their teams should keep current on the status of their state laws by working closely with their lawyers and staff. The second part of this column will offer recommendations on how SBOs can navigate the bidding process successfully to reach the best possible agreements while avoiding unnecessary and potentially costly litigation from disappointed bidders.