PREPARATION OF BID DOCUMENTS

II.  PREPARATION OF BID DOCUMENTS

A. Statutory Requirements

1.  Advertising for bids is required by Minn. Stat. § 375.21 to allow potential bidders notice and time to prepare responsive proposals.

a. Where there has been insufficient time allowed for proper responses from bidders, contract awarded as a result of that bidding process may be permanently enjoined.  Northwest Petroleum Ass'n v State Dept. of Econ. Sec., 402 N.W. 2d 591 (Minn. App. 1987).

b. A bid for work or labor must be advertised for two weeks in a "qualified legal newspaper of the county."  Qualified legal newspaper is defined in Minn. Stat. Ch. 331A.

c. A bid for construction, repair of roads, bridges or buildings must be advertised for three weeks.

d. Minn. Stat. § 645,13 instructs how "weeks" are to be determined.  At least the number of weeks specified must elapse between the first publication and the day of the event for which publication is made.

e. The last publication of the notice shall occur not more than 14 days and not less than seven days before the bid opening.  Minn. Stat. § 331A.05, subd. 2(b).

f. The published notice must state at a minimum:

1) the time of awarding the contract
2) the place of awarding the contract
3) a brief description of the work (in the case of construction or repair of roads, bridges or buildings.)

g. There is an exception to advertising requirement in case of improvement made under a cooperative agreement with the State or another political subdivision where the other governmental entity is to construct or to contract to construct the improvement.  Minn. Stat. § 429.041, subd. 5.

2. Specifications for bids shall not exclude all but one type or kind of supplies or equipment; specifications must allow for competition.  Minn. Stat. § 471.35.

a. However, the Minnesota Supreme Court has held that municipalities have "reasonable latitude" in determining the needs of the community in terms of what equipment best suits its needs.  Bid specifications need not allow every manufacturer to bid. Otter Tail Power Co. v Village of Elbow Lake, 42 N.W. 2d 197 (Minn. 1951).

b. Drafting bid specifications that fit only one make of school bus is improper according to the Attorney General.  O.A.G. 707a-12, May 28, 1953.

c. Minnesota law recognizes that some kinds of supplies and equipment may not lend themselves to competitive bidding.  Minn. Stat. § 471.36.

B. Sufficiency of Particular Bid Specifications

1. Bid specifications must be:

a. Drafted to assure taxpayers of the best bargain for the least money. Griswold v. Ramsey County, 65 N.W.2d 647 (Minn. 1954).

b. Drawn as to give all bidders equal opportunity without granting advantage to one or placing others at a disadvantage.  Foley Bros. v. Marshall, 123 N.W. 2d 387 (Minn. 1963).

c. Sufficiently definite and precise and free from restrictions, the effect of which would be to stifle competition.  (See 13A Dunnell Minn. Digest 2d, Municipal Corporations 11.04c (3d ed. ) at n.61.)

2. A County has the authority to make and enforce any bid requirement or specification that conforms to sound business practice.  The statutes do not contemplate specific requirements actually included by a county in a bid package.  Tunny v City of Hastings, 141 N.W. 168 (Minn. 1913); O.A.G. 707a-3, February 24, 1964.  To illustrate: a municipality drafted specifications for a piece of equipment that required bidders to include guaranteed maximum repair costs for a specific period of time after purchase, and a guaranteed minimum repurchase price.  A bidder challenged the validity of these requirements.

The court found:

-  that by fixing a salvage value (repurchase price) the purchase would assure the taxpayers the best bargain for the lowest overall price; (see O.A.G. 707a-7, January 9, 1968.

-  that it is legitimate to pinpoint repair costs of the equipment, (see O.A.G. 707a-7, supra).

-  that neither of these requirements impede free competition.

-  NOTE: In order to meet the argument that Minn. Stat. § 373.01 requires counties to sell surplus property at auction, the repurchase guarantee can be structured to provide that it is a guarantee by the bidder that it will submit a bid in at least that amount upon an offering of the equipment as surplus.

-  The specifications might also reasonably include estimates by the bidder of yearly maintenance costs and estimates of product availability of use to the county - that is, estimates of down time and estimates of the time for the Supplier to get a repair person on site to make repairs.

3. Bidding Particular Brands

a. Specifications must be drafted to permit full and free competition. Hendricks v City of Minneapolis, 290 N.W. 428 (Minn. 1940).

b. Subject to certain rules, a county may specify particular brand name items if such is necessary and desirable. O.A.G. 707a-12, May 23, 1962.

c. The primary condition precedent to bidding brand name items appears to be their availability to other suppliers who can submit bids on their own behalf,  building in whatever profit margin they want. Hendricks, supra; Hodgeman v. City of San Diego, 53 Cal. App. 2d 610 (1942);Gamewell Co. v. City of Phoenix, 216 F. 2d 928 (9th Cir. 1954).

d. "...where experience has proven a particular brand of trade name product to be satisfactory, the specification may...call for a particular product by that name and add the phrase 'or product of equal or better quality,' and thus avoid an unnecessary restriction upon otherwise qualified bidders...' Shore Gas & Oil Co., Inc. v. Borough of Spring Lake, 98 A.2d 689 (N.J. 1953); McQuillin, Municipal Corporations (3d ed.) § 29.49.

4. Bidding Patented or Exclusively Held Materials

a. It probably depends on the facts of a given case whether patented equipment is non-competitive under Minn. Stat. § 471.36. See discussions at 3.c. above.

b. According to McQuillin, the better rule is to the effect that the governmental body my specify patented items because to hold otherwise would defeat the purpose of allowing legislators to decide on goods which they feel best further the public purpose.  McQuillin, Municipal Corporations (3d ed.) § 29.42.

c. Non-competitive equipment is generally that which is manufactured by only one company or available through only one supplier so that only a single bidder is capable of submitting a bid.  Specifications may be written in this instance which exclude all but one type or kind of goods.  A holding to the contrary would run counter to the "...discretion, inherent in every public corporation, to exercise sound business judgment concerning contracts which do not lend themselves to open competitive bidding because of unique considerations not applicable to ordinary expenditures for public construction." Gephart v. Hospital Facility Fldg. Comm'n., 132 N.W. 2d 738 (Minn. 1965).

5. Bidding Quantity

a. Quantity is an essential specification for bid documents to enable bidders to intelligently prepare their proposals, giving due consideration to discounts for volume sales or increased costs for smaller orders.

b. A bid specification calling for enough of a particular material "to meet seasonal requirements" by itself is too vague and is invalid.  After bids there is no common denominator (quantity) upon which to compare prices. O.A.G. 707a-62, June 2, 1954; O.A.G. No. 112, April 2, 1930.

c. Precision is not required.  Estimates based on prior years' experience in specifications should add the certainty needed, so long as the estimate is not grossly inadequate.

d. There must be sufficient project information to allow bidders to intelligently calculate their bids.

1) If the kind or amount of work or material required is indefinite, the advertisement for bids must still contain sufficient information for bidders to calculate their bids for free and open competition. McQuillin, Municipal Corporations (3d ed.) § 29.54

2) An advertisement may permit or require submission of bids on alternative kinds or qualities of work or materials.  McQuillin, supra § 29.55.

3) Specifications may make reference to plans, specifications and data on file in an accessible place available to all bidders.  McQuillin, supra, § 29.57.

6. Installment Payment Option

a. Installment contracts or lease purchase agreements under which title is retained by the vendor or assigned to a third person as security for the purchase price may create an "obligation" (a promise to pay a stated amount at a fixed future date, regardless of the source of und to be used for its payment), thereby requiring a public referendum.  Minn. Stat. § 475.51; Minn. Stat. § 475.58; O.A.G. 166-b, April 27, 1986.

b. Exceptions to referendum requirement:

1) Seller is limited on default to recovery of property.

2) Agreement contains "non appropriations" clause

c. Exception for purchase of capital or other equipment to improve energy efficiency of buildings or facilities owned by municipality.  Minn.Stat. 471.345, subd. 9.

d. Exception for installment and lease purchases under 1989 Laws, ch. 329, art. 5, 16, amending Minn. Stat. § 465.71.

e. Always consult special laws of a subject county for other exceptions.

f. Consider also continued viability of O.A.G. 125a 40, January 18, 1966, to the effect that there must be money in the treasury for payment of a debt created; or, must a tax have been levied and in the process of collection?