Capital Planning and Budgeting
Local officials are required to comply with their own procurement policy and with competitive bidding requirements when undertaking a capital project. Additionally, the governing boards are responsible for overseeing the competitive bidding process.
The purpose of competitive bidding and the solicitation of quotes is to encourage competition in the procurement of supplies, equipment, and services that are paid with public funds. Competition provides taxpayers with the greatest assurance that goods or services of desired quality are procured in the most prudent and economic manner.
What is subject to competitive bidding? Purchase contracts, including materials only, in excess of $20,000, and contracts for public work, including labor and materials, that exceed $35,000, are subject to competitive bidding requirements as set forth by law. In determining the necessity for competitive bidding, the aggregate amount expected to be expended for the same commodities, services, or technology within the 12-month period commencing on the date of the purchase should be considered. Additionally, the board must approve change orders and assess whether purchases and/or services as indicated on project change orders are subject to competitive bidding based on the significance, including dollar amount, of changes to a project’s scope.
It is also the governing board’s responsibility to ensure that sealed bids are opened at a public meeting and that the bid is awarded to the lowest responsible bidder. Bids 10 or more percent lower or higher than the engineer’s final estimate should be carefully analyzed to see if a bidder has proper understanding of the project, and if so, whether the engineer’s final estimate properly took into account all the factors affecting project cost.
More information on competitive bidding can be found in our Local Government Management Guide entitled Seeking Competition in Procurement [pdf]. You are also advised to consult with your local government attorney for additional guidance.