Competitive bidding is designed to allow for bidders to compete, consistent with the standards of quality and the terms and conditions provided by the contract documents. This form may be open to all interested parties or to just an invited group of contractors. Generally, it involves a complete set of design and bidding documents whereby award can be made on an objective (often to the low bidder) basis.

On public work, Section 103, General Municipal Law, sometimes termed the "low responsible bidder law," governs for material purchases valued at greater than $10,000 and public work project valued at over $20,000. Its highlights include the following:

• Requires a complete set of plans and specifications whereby bidders compete on a level playing field
• Requires public advertisement with special note about school work (…more)
• Requires award to the lowest responsive and responsible bidder (…more)
• Prohibits prequalification (including sublisting) and arbitrary qualification prerequisites (…more)
• Requires free and open competition among equivalent materials, products and manufacturers (…more)
• Prohibits breaking work into smaller packages to avoid the threshold
• Prohibits post-bid negotiations of price and scope
• Requires a non-collusive bidding certificate to be submitted with the bid.

PUBLIC ADVERTISEMENT: Section 102 of General Municipal Law requires advertisement of the project in the official newspaper or newspapers of the public entity. The advertisement must state the date, time and location for the public opening of the bids. Pursuant to law, such advertisement is required at least five days prior to bid opening. To be sure, that would be a minimum based upon purchase contracts. For purposes of maximizing competition on public work, a time frame of around four weeks is more appropriate.

Special Note on Schools: It should be noted that Section 408 of Education Law requires approval by the Commissioner of Education for the State of New York prior to the advertisement for a public work project. It is strongly recommended that attempts to circumvent the spirit of this law by putting the documents on the street and then providing for the legal minimum (five-day) advertisement later be shunned. Most bidders will pay little attention to the documents until the firm bid date is announced by the formal advertisement. The action, therefore, will gain you little except, perhaps, the perception that some bidders are being given an unfair advantage with back-door information.

AWARD TO THE LOW RESPONSIBLE AND RESPONSIVE BIDDER: Of great importance to the public client as well as to the contractor is the method of award clause, which makes clear how bids will be treated after receipt. Section 103, General Municipal Law, and other parallel sections of the State’s competitive bidding statutes, require award to the lowest responsible bidder who has submitted a responsive bid.

Essentially, there are only two valid reasons for rejecting a bid: the bid is not responsive or not in compliance with the bidding requirements or the bidder is not a responsible bidder.

Responsive Bids: A bid must be rejected if the non-compliance with the bidding requirements is material or substantial. A material or substantial variance with the bidding requirements is one that would give the low bidder an unfair competitive advantage over the other bidders or would hurt the interests of the public owner. Bids that are qualified should not even be read and, if read, must be rejected as non-responsive. Technical non-compliance or deviations that are minor or not substantial, on the other hand, may be waived if it is in the best interest of the owner to do so.

Responsible Bidders: The public owner has not only the absolute right to determine, post-bid, whether a low bidder is "responsible" but also the duty to make such a determination. Although the making of such a determination may be burdensome, it is to the great advantage of the public client to undertake the necessary investigations of a bidder’s prior performance, its financial and technical capacity to undertake the project at hand and its reputation in the marketplace. Given even-handed assessment of a contractor’s capabilities and resources, the bid of an incompetent may be rejected and the action of the public agency upheld by the courts. It is important to note, however, the courts have ruled against such rejections when the proper procedures for rejection were not followed including not doing the necessary homework of documentation and not providing due process rights to the bidder by the granting of a hearing.

It must be clearly understood that the process of determining responsibility is not a matter of comparing the low bidder’s qualifications and background with those of other low bidders. The notion that the second bidder is more qualified than the low bidder is not sufficient reason for rejection of the low bidder. Each bidder must be investigated individually and factually on a case-by-case basis. Once the low bidder is determined not to be responsible, then may the investigation begin on the next bidder.

While Section 103 of General Municipal Law contains no clear definition of responsibility, case law and Section 120W of General Municipal Law provide a good set of guidelines. They include:

• Adequate financial resources or the ability to obtain those resources
• Ability to comply with the required or proposed delivery or performance schedule
• Satisfactory record of performance
• The necessary production, construction and technical equipment and facilities, or the ability to obtain them
• Eligibility to receive an award under applicable laws and regulations (e.g., NYS Prevailing Wage Law)
• Past or present criminal or corrupt conduct

PREQUALIFICATION: Many professionals are prone to seek prequalification of contractor, vendor, manufacturer or subcontractor. In the private sector this is acceptable, although caution should be taken to avoid undue limitations. In any case, once pre-qualification has been exercised, post-qualification should be avoided.

As to public work, the competitive bidding laws of New York State do not permit prequalification or any other undue or arbitrary restriction or barriers on entry into the marketplace. Such undue restrictions or barriers include:

• Experience Prerequisites (…more)
• Restrictive Insurance or Bonding Requirements
• Mandatory Pre-Bid Meeting Attendance (…more)
• Sublisting (…more) 
• Misuse of Qualification Statement Submitted with the Bid (…more)

Experience Prerequisites: A lazy, albeit still illegal, method of prequalification has been to set forth certain experience prerequisites. These experience requirements have been viewed by the courts as arbitrary and anti-competitive (see Construction Contractors Association and GBC v. the County of Orange). The qualifications of any contractor should be looked at individually and objectively. There is no empirical or other evidence to substantiate that contractors meeting such experience requirements are necessarily more qualified to do the work than ones falling short of those requirements. More to the laws of New York State, there is no evidence that one falling short of those requirements would necessarily be unable to perform the work as specified.

Mandatory Pre-Bid Meeting Attendance: Requirements for mandatory pre-bid meeting attendance violate §103 of General Municipal Law in that they, too, are forms of prequalification. They are also prone to dispute. What happens, for example, if the low bidder did not attend the meeting? If you reject him, he may bring an action; if you do not, the next lowest bidder might.

What is the real purpose of the meeting? The competitive bidding laws of New York State demand complete plans and specifications. If any questions arise in the pre-bid meeting, it would be inappropriate to answer verbally since only a written response in the form of an addendum is enforceable.

If a consideration at all, pre-bid meeting attendance should only be considered as one factor in determining the responsibility of the low bidder and, even at that, only where there is some question whether the bid was too low.

Qualification Statements with the Bid: The low bidder only should be required to submit qualification statements with related backup information within a specified period of time, post bid. If, by objective evaluation of the facts before you regarding that contractor, he is not responsible then he should be rejected and the next bidder should be evaluated in the same fashion. Requiring all bidders to submit this information with the bid could lead one to the conclusion that you seek to compare bidders.

Two practical problems with this requirement are: (a) it is an unnecessary paperwork burden on all involved, and (b) by asking for this information as part of the bid, you may not be able to shield proprietary information from a Freedom of Information Request.

EQUIVALENTS – "OR EQUALS": As a practical matter, owners do themselves a disservice when either by overt or subtle specification competition is limited, particularly if limited to one product or manufacturer. Such issues as bid vs. list price and packaging can have significant impact on price while, amazingly, impacts on project performance might also be felt. On public work, such restrictions are, for the most part, prohibited.

Overt and Subtle Limitations of Competition: Proprietary specifications come in two forms. The overt form is where one specific product is specified and it is made clear to bidders that no equivalent products will be accepted. The second, and more subtle, approach is to write a performance spec which effectively precludes all but one product. While neither form is good, this reviewer prefers the former. The latter is sneaky!! It leads bidders down the primrose path, believing they have a shot with another manufacturer. Only the supplier of the proprietarily specified product knows the fix is in, and his price reflects it. Contractors bid on alternatives looking to be competitive only to have it blow up in their face. The contractor has been damaged and the project has begun on the wrong foot.

Bid Price vs. List Price: It must be recognized that many suppliers have at least two prices in their repertoire, one for competitive situations and one for non-competitive. In a competitive situation, the sharp-penciled "bid price" is the one provided. In a non-competitive situation, the "list price" is used. The list price can be considerably higher than the bid price and, so long as the non-competitive message is in place, it is unmovable. We have seen situations where suppliers, believing they had a performance spec locked up due to long-time relations with the designer, provided a price considerably higher than the competition. When this reviewer and the contractor fought to break the barriers to competition placed by the designer and won by going to the owner and the owner’s attorney, the price from the supplier suddenly dropped 48%. Amazing!!!

Packaging: If a supplier of a number of products has franchise control over a proprietarily specified product he will not sell that product except in a package with a variety of other products for which the owner or designer thought they had adequate competition. Not only, then, will the proprietarily specified product be at the "list price," the entire package will be at that inflated cost. Calls to the manufacturer can sometimes break the package but that is by no means a sure thing.

Performance Impacts: A second disadvantage relates to the responsiveness of the supplier during construction. We have found that as long as the supplier believes he has the project sewn up and as long as there appear to be no later repercussions, the proprietarily specified product can be difficult for the contractor to manage. Indeed, the supplier no longer believes he works for the contractor, in spite of a supply contract. He believes he works directly for the owner or the designer. Often, the supplier believes himself to be working for the users of the facility and not even the construction and engineering side of the owner. This causes numerous performance and responsiveness issues.

A good rule of thumb is to specify a minimum of three products (see public work requirements below). This will generate enough competition to alleviate the upward pressure on price. It is important that designers thoroughly research those items listed. Too often, outdated lists are used in which products listed are no longer made or the manufacturer is out of business. In some circumstances, "Buy American" provisions prohibit the use of two out of the three products listed. We have even seen troubling situations where contractors seek to use listed products only to have them rejected.

Public Work: Generally, the competitive bidding statutes of New York State demand free and open competition among equivalent products. First and foremost, that means the standard in all public works specifications should be what is known as the "or equal" clause. This clause essentially states that in the technical specifications the words "or equal" or "or approved equal" may be assumed after each and every list of products. The fact is, the term "equal" is a misnomer. The proper term is "equivalent." It is the performance of the product that is important. The listed products set up a performance standard, which must be met. It is not important that each bolt or internal mechanism be exactly the same as the listed product, only that it perform the same function to the same effectiveness.

Court cases have stated that either in interpretation of the performance standards of the product or in the performance spec itself, it is a violation of law to specify in such a way that only one product may meet the spec. It has also been found that barriers placed in the way of competition on said products are prohibited. In relation to this, there are a number of more specific points to be explored. They are:

• Pre-Bid Approval Requirements
• Equivalent Listing Requirements
• Payment for the Privilege of Review
• Bids Presumed Based Upon Specified Products
• Post-Bid Price Change on Equivalents
• Creation of Competition through Alternates
• Substitution vs. Equivalent
• Performance Specifications Plus Manufacturer List
• The Mythical Rule of Three

Pre-Bid Approval Requirements: In 1972, the case of GBC v. the City of Syracuse was decided. In relation to equivalents, that case found that any requirements which demand that, in order to be considered an acceptable product, application for acceptance must be made ten days prior to bid opening, are extra legal. The court stated that such requirements amount to illegal prequalification and a roadblock in the way of free and open competition.

Equivalent Listing Requirements: Similar to the prohibition of requirements for pre-approval of equivalents is the prohibition of requirements that the proposed equivalents and manufacturers be listed with the bid. For guidance on this matter, the case of GBC v. the City of Syracuse must again be consulted. It is found here that such requirements are an illegal form of prequalification.

Payment for the Privilege of Review: The idea that the contractor must pay the designer for the privilege of reviewing the product for the equivalency is equally offensive and is another roadblock in the way of free and open competition.

The fact is, the designer was presumably paid to provide a set of bidding documents that would facilitate the delivery of a quality project on time and within budget. To accomplish that, one of the tasks would be to maximize competition, as noted above. When it comes to equivalent products, an owner should expect the design professional to determine equivalency of a sufficient number of products to accomplish that end, and to list them in the contract document. Recognizing that a product might be missed by a design professional and wishing to eliminate temptation to lock up specs due to laziness or graft, Section 103 of General Municipal Law has required that equivalents be freely and openly encouraged.

The idea that the contractor is possibly being asked to pay for the review discourages the use of equivalents. Moreover, this practice might lead to a conclusion that the designer did not provide the service to the owner and taxpayer that they contracted to provide. Instead, they have limited competition, potentially increasing costs, and required the contractor to pay for that which the owner has already paid. Of course, those costs will eventually be paid by the owner anyway.

Bid Presumed Based Upon Specified Products: Statements to the effect that the contracts will be awarded "without consideration of possible substitute or ‘or equal’ items" are violative of the provisions of Section 103, General Municipal Law, which call for open competition, thus requiring that the use of "or equals" be encouraged by the public owner. The idea is that the owner achieves the benefits of competition during the bidding. The low bid, therefore, must be based upon the use of those equivalent products.

Post-Bid Price Change on Equivalents: Clauses seeking to require the contractor to credit the savings to the owner based upon the proposed equivalent violates the very idea of an equivalent. The purpose is for the taxpayer to gain the advantage of their use at bid time by the increased competition. The price advantage will have already been granted in the bid.

In addition, talk of price change on equivalent products may be considered a form of negotiation also precluded by the competitive bidding statutes.

Creation of Competition Through Alternates: Noted recently is a misuse of the alternate system in that attempts are made to create competition for various products through the alternate bidding system. In effect, the specifications call for the base bid to be based upon use of a proprietary item with the ability to use other listed products by noting a price change in the alternate lines.

Here again, §103 of General Municipal Law demands free and open competition and it clearly prohibits specifications written in such a way that only one manufacturer can meet the specs. Using the alternate method does not meet the test of §103 in that you have simply set up a series of proprietary specs and competition in the base bid has not been created. In fact, to meet the test of §103, assuming the alternate products are not equal to the base bid product, the bid should be based on the base bid product "or equal." In addition, each corresponding alternate should be on the listed product "or equal." If, on the other hand, the alternate products are equivalent to the base products, there should be no change in price on any of the alternates. They will all be based on the same item.

Substitution vs. Equivalent: Some confusion is often apparent in specifications as to the difference between equivalents and substitutions. An equivalent is a product that is equal to the standard of quality set in the documents. Its use should be an option of the bidder so as to allow for a maximization of competition. Inherently, the contractor takes a risk that his judgment of the product equivalence is proper since the professional must approve the equivalent, post bid. The price advantage has already been gained by the owner in the bid by the maximization of competition.

A substitution, on the other hand, is a product of lesser or greater quality which does not meet the performance requirements of the specs. It is not inappropriate in that case to request price changes.

Performance Specifications Plus Manufacturer List: Much confusion erupts when specifications include both a detailed performance specification and a listing of acceptable products. As to the former, contractors must supply a product that meets the performance specification. As to the latter, the contractor must supply a product listed "or equal."

The confusion occurs where (1) the time requirements for submitting proposed equivalents are not met and the designer seeks automatic rejection. In point of fact, given the performance spec, the "or equal" provisions don’t really apply. (2) One or more of the listed products don’t meet the performance specification.

The Mythical Rule of Three: In our travels we have often heard from both contractors and designers a myth about "or equal" requirements. That myth surrounds the rule of thumb that a minimum of three manufacturers be listed in the specifications. Contractors believe that it is a violation of law if at least three are not specified. While this reviewer understands that some municipalities have internal guidelines to this effect, there is no such requirement tied to the State competitive bidding statutes. Designers, on the hand, believe that if the "minimum" of three is listed, they do not have to accept equivalents. That, too, is untrue. If ten are listed, the "or equal" clause must still be used. As noted above, three might be listed but, for a variety of reasons (i.e., buy America provisions, discontinued manufacture), only one of the products may, in reality, be used.