Thursday, November 19, 2015

Research Q of the Week: Competitive Bidding Basics (11/19/15)

Question: The competitive bidding law is confusing. When do we need to get bids and when do we don't?

Answer:
Wouldn't it be great if we could just have speed-talkin' auctioneers handle the details? Perhaps in a bolo tie? No? Well anyway, the key is knowing when competitive bidding is required according to state law and when competitive bidding doesn’t need to be used. Two things trigger competitive bidding:

Type of contract + Estimated price

Type of contract
The competitive bidding law applies only in two situations:
• Contracts for the sale, purchase, or rental of supplies, materials, or equipment or
• Contracts for the construction, alteration, repair, or maintenance of real or personal property
Cities are not required to follow the competitive bidding process when contracting for professional services, such as for engineers, lawyers, architects, and accountants.

Estimated price
The estimated price of the contract also determines if the competitive bidding process is required:
  • Contracts over $100,000: The city must use the competitive bidding process.
  • Contracts between $25,000 and $100,000: Competitive bidding is allowed but not required. The city can either:
    • Use the competitive bidding process or 
    • Contract by direct negotiation (requiring at least two quotes)
  • Contracts $25,000 or less: The city has discretion to:
    • Contract by direct negotiation (requiring at least two quotes) or
    • Buy or sell the item on the “open market” (ex. Ebay)
For example, if the city is building a new fire hall, which would cost more than $100,000, then competitive bidding is required.

If, on the other hand, the city was buying a fire truck that was $50,000, then the city would not have to use the competitive bidding process. But if the city did, then it has to follow the requirements of the competitive bidding process, even though it wasn’t originally required to do so.

Competitive bidding can be complicated, even at regular speed, so check the League’s Competitive Bidding Memo for more information.

Written by Irene Kao, research attorney with the League of Minnesota Cities. Contact: ikao@lmc.org or (651) 281-1224

This blog post conveys general information. It’s not legal advice. Please check with your city attorney before acting on this information.

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