THE DECISION TO BID

I.  The Decision to Bid

     A. Purpose of Bidding

1.  The Minnesota Supreme Court has indicated the underlying intent of the competitive bidding statutes in the following statement:  " A fundamental purpose of competitive bidding is to deprive or limit the discretion of contract making officials in the areas which are susceptible to such abuses as fraud, favoritism, improvidence, and extravagances."  Griswold v County of Ramsey, 65 N.W.2d 647 (Minn. 1954).

2.  However, the Minnesota Supreme Court in Hubbard Broadcasting, Inc. v. Metropolitan Sports Facilities Commission,381 N.W.2d 842 (Minn. 1986) held that the bidding statutes are to be narrowly applied.  The Court found the agreement for the scoreboard system for the stadium "is more than a contract for merely materials, supplies, or equipment....Many of the features of the agreement are simply beyond any fair meaning of contracts for materials, supplies and equipment with in the statute."  Id.at 846.  Thus, the court concluded that the competitive bidding statute (Minn. Stat. 471.345) did not apply.  The following lengthy quote is instructive of the court's reasoning:

We have recognized that public bidding provisions are to be construed narrowly.  In R.E. Short Co. v Minneapolis, 269 N.W.2d 331, 342 n. 11 (Minn. 1978), we noted that the public bidding statute is restrictive and should not be extended to contracts not envisioned by the legislature.  In Griswold v. Ramsey County, 65 N.W. 2d 647, 651 (Minn. 1954), we stated:  "In the absence of a controlling constitutional, statutory, or charter provision, it is generally held that public policy does not demand that a municipal corporation...advertise for bids and let the contract to the lowest responsible bidder." ...One authoritative text notes:  "These [competitive bidding] provisions are strictly construed by the courts, and will not be extended beyond their reasonable purport.  Such provisions must be read in the light of the reason for their enactment, lest they be applied where they were not intended to operate and thus deny municipalities authority to deal with problems in a sensible, practical way."  10 E. McQuillin, Municipal Corporations (3rd ed.) S 29.29 (citations omitted).  This principle of narrow construction requires that the contract being challenged must unambiguously fall within the language of the public bidding statute...

     B. Statutory Provisions

Three statutes identify generally which county contracts are subject to competititve bidding:

Minn. Stat. § 373.01: delineates the powers and duties of a county, including requirements for the sale, lease or conveyance of personal property over $15,000 and real property owned by the county.

Minn. Stat. § 375.21:  addresses county contracts for work or labor, or to purchase furniture, fixtures or other property, or to construct or repair roads, bridges or buildings; and

Minn. Stat. § 471.345; Uniform Municipal Contracting Law.

These statutes identify purchases or conveyances for which competitive bids must be sought and establish the basic procedural framework for the bidding process.

     C. Situations Generally Requiring Bid Solicitations:

1.  If the amount of a contract is estimated to be over $15,000 $50,000, competitive bidding must be solicited for:

a.  Work or labor, or to purchase furniture, fixtures or other property, or to construct or repair roads, bridges or buildings (Minn. Stat. § 375.21), or

b.  The sale or purchase of supplies, materials, equipment or the rental thereof (except see 3. below), or the construction, alteration, repair or maintenance of real or personal property.  (Minn. Stat. § 471.345, subd. 2)

2.  Competitive bidding must generally be solicited for the sale, lease or conveyance of real estate owned by the county.  However, exceptions to bidding in Minn. Stat. § 373.01 subd. 1(4) include:

a.  The lease of a residence acquired by the furtherance of an approved capital improvement project;

b.  Leases that do not exceed $15,000 for any one year may be negotiated rather than bid;

c.  Acquisition of county right-a-way property may be by exchange of parcels of real property of substantially similar or equal value without advertisement for bids.

3.  Competitive bidding must be solicited for rental of equipment estimated to be more than $60,000.  (Minn. Stat. § 471.345, subd. 5a).

The estimated contract price is determined to be over the dollar limitations set forth above if the individual contract price to be paid or received is over the amount.  In multi-year contracts the estimated contract price is determined to be over the dollar limitations set forth above if the total contract amount is over the limitations [i.e., do not divide into a per year amount].

See also Minn. Stat. § 465.71 for installment and lease purchases.

  D. Exceptions to Bidding Requirements

1.  Contracts estimated from $10,000 to $15,000 may be $10,000 to $35,000 for municipalities of less than 2,500 population; $50,000 for all others. If the amount of the contract is estimated to exceed $10,000 but not to exceed $35,000 for municipalities of less than 2,500 population, or $50,000 for all others may be competitively bid or handled by direct negotiation if:

a.  Two or more price quotations are obtained when possible; and

b.  all quotations are kept for one year after receipt.  (Minn. Stat. § 471.345, subd. 4.)

2.  Contracts estimated at less than $10,000 may, in the discretion of the governing body, be:

a.  Based on two or more quotations, if practicable, which shall be kept on file for a period of at least one year after their receipt;

b.  Made in the open marketplace. (Minn. Stat. § 471.345, subd. 5.)

3.  Emergencies:

a.  Minn. Stat. § 375.21 excepts from bidding, repairs for destruction of roads or bridges by floods, rain, snow or other casualty or from the breaking or damaging of any property in the county if the public health, safety or welfare would suffer by delay; and the action of the board is recorded in its official proceedings.

b.  Minn. Stat. § 375.22 provides that bidding is not required in case of an emergency arising from:

Breakage, damage or decay in county property that cannot be allowed to wait for the time required to advertise for bid if the work is authorized by a majority of the board of county commissioners and the action is ratified and recorded in the official proceedings of the board

c. Minn. Stat. § 106A.705, subds. 4, 5 and 6 provide that:

1) Repairs and maintenance to a drainage system where the total cost is less than $50,000 or $1000 per mile of open ditch may be done without advertising;

2) A drainage authority may repiar and reconstruct a drainage system without regard to the $50,000 or $1,000 per mile limitation if:

a) A drainage system is destroyed or impaired by floods, natural disaster or unforeseen circumstances;

b) The area where the drainage system is located has been declared a disaster area by the President of the United States and federal funds are available for repair or reconstruction; and

c) The public interest would be damaged by repair or reconstruction being delayed.

d. Emergency has been defined by the Supreme Court as a situation arising suddenly and unexpectedly which requires speedy action essential to the health, safety and welfare of the community.  "[A]n emergency which will warrant dispensing with advertising for competitive bids must e present, immediate and existing, and not a condition which may or may not arise in the future, or a condition which reasonably may be foreseen in time to advertise for bids." Layne Minnesota Co. v. Town of Stuntz, 257 N.W. 2d 295 (Minn.1977).  Here the Court found no emergency in digging a new town well since the town's water supply was not seriously jeopardized.  The Court found there was adequate time to advertise and, therefore, bids should have been solicited.

e. For other emergency situations justifying exception to bidding requirements see:

1) fire destroyed a storehouse, thus exposing valuable machinery to the threat of loss from the elements or theft; county could proceed to buy a building to replace storehouse. O.A.G. 707a-7, July 13, 1944.

2) desturction of a bridge by flood justifying exception to bidding.  O.A.G. 642a-12, May 25, 1943.

4.  Noncompetitive Supplies and Equipment (Minn. Stat. § 471.36)

  In certain circumstances, a county may seek to purchase types and kinds of supplies and equipment for which there is no competition in the marketplace.  The purchase of such supplies and equipment are exempted from the competitive bidding requirements of Minn. Stat. § 471.35 and 471.35.

a. Bid specifications for noncompetitive items may exclude all but one type or kind, primarily because there will be only one type or kind available in the marketplace.  This principle has been held applicable in California decisions in a variety of situations involving both the purchase of services and products and the construction of public improvements and buildings where it has appeared that competitive bidding would be incongruous or would not result in any advantage to the public entity in efforts to contract for the greatest public benefit.  Graydon v Pasadena Redevelopment Agency, 164 Cal Rptr. 56, 104 Cal. App. 3d 631 (1980).

b. Exclusive patented items presumably fall into this category.  Although no Minnesota courts have so ruled, other authorities support this position:  Saunders v Iowa City, 111 N.W. 529 (Iowa, 1907); Hodgeman v. City of San Diego, 53 Cal. App. 2d 610, 128 P.2d 412 (1942); 49 Harv. L. Rev. 1006; McQuillin, Municipal Corporations (3d ed). § 29.42.

c. Where there is only one source capable of supplying the subject matter of the contract, the general rule is that bidding is not required, even absent a statutory exception.  McQuillin, Municipal Corporations (3d ed.), § 29.34.

d. Contracts for experimental or unique products and/or services are exempt.  Hiller v. City of Los Angeles, 17 Cal. Rptr. 579, 197 Cal. App. 2d 685.

e. Contracts for acquisition or disposition of property for a particular use and with a special value to one person are exempt. Orange County Water District v. Bennett, 156 Cal. App. 2d 745, 320 P.2d 536.

5. Personal Service Contracts.

  Contracts for personal or proes dependent on an individual's particular skill or ability are not subject to bidding.  Kennedy v. Ross, 28 Cal. 2d 569, 170 P.2d 904 (1946).

6. Multi-purpose purchases.

  Purchases which are in part materials and i part a sale/lease are not governed by Minn. Stat. § 471.345. The principle of narrow construction of bidding laws requires that the contract being challenged must unambiguously fall within the public bidding statute. Hubbard Broadcasting, Inc. v Metropolitan Sports Facilities Commission, 381 N.W. 2d 842 (Minn. 1986). A contract for a scoreboard for metropolitan sports facilities which includes a lease agreement for advertising and lease/purchase provisions is not a contract for supplies, material or equipment subject to competitive bidding under Minn Stat. § 471.345 [But see Minn Stat § 373.01, 373.21]

7. Miscellaneous exceptions.

  a. Intergovernment contracts for personal/real property between federal, state, or political subdivisions are not subject to bidding requiremetns.  Minn. Stat. § 471.64 and § 465.035.

  b. A contract between a town and a county for removal of snow from town roads is not subject to bidding requirements.  O.A.G. 707a, March 5, 1986.

  c. A proposed contract for remodeling and purchase of a building for use as a city hall, if not done as a mere subterfuge to circumvent competitive bidding, can be treated as an acquisition of real property outside the scope and application of bidding requirements.  Such a contract should be viewed as an entirety in light of the particular facts and circumstances and not simply as one part of the contract (i.e. remodeling) standing aline.  O.A.G. 707a 15, September 14, 1987.

  d. Ambulance service may be provided or contracted for pursuant to Minn. Stat. § 471.476 without competitive bidding.  Ambulance services are considered professional, technical services rather than materials or labor.  O.A.G. 707a-7, July 22, 1985.

  e. County may sell self-developed or vendor customer developed software on either competitive bid or in the open market.  Minn. Stat. § 375.85.

  f. A bond is not "the purchase of furniture, fixtures or other property and is therefore not subject to bidding requirements."  O.A.G. No. 148, p.267 (1950).

  g. Group insurance for 25 or more employees shall be solicited through requests for proposals, notice of which is published in a public newspaper at least 21 days before the final date for submitting proposals.  The request for proposal responses shall be evaluated using written criteria.  A county may negotiate with a carrier on benefits, premiums, and other contract terms.  A written rationale for the decision to select a specific carrier must be prepared by a county before entering into a contract.  Contracts may no exceed five years.  Minn. Stat. § 471.6161

h. Recycling services and purchase or lease of personal property or equipment for a solid waste management program may be obtained by a county with or without advertisement for bids, including the use of conditional sales contracts and lease/purchase agreements.  (Minn. Stat. § 400.04; not applicable to Hennepin, Ramsey, Washington, Anoka, Dakota, Scott and Carver counties.)  Metropolitan counties (defined in Minn. Stat. § 473.121) may contract for the acquisition, construction, improvement, maintenance or operation of solid waste facilities or property or property rights for solid waste facilities by any means available and in the manner determined by the county board, with or without advertisement for bids.