By Wayne Meuleman

In its most important revision to public works bidding laws in several years, the Idaho Legislature adopted comprehensive new laws governing public works projects for local governments. Among other changes, for the first time public agencies may require “prequalification” of contractors to bid for projects to be constructed by local government entities, including counties, cities, school districts, and many other political subdivisions of the state. The changes become effective on July 1, 2005.

With the addition of construction management licensing in Idaho a few years ago, many local government agencies (particularly school districts) have used a “construction management” approach for major projects. The frequently expressed reason has been dissatisfaction with competitive bid process which requires public agencies to contract with the lowest bidder without regard to the low bidder’s particular qualifications or experience. Whether or not true, local agencies often contend that using the lowest bidder causes problems, delays, and excessive claims on projects. The construction manager licensing law allowed public agencies to select a manager based upon criteria other than cost. It also allowed agencies to use the same manager on successive projects or on multiple projects constructed simultaneously.

Construction management has not been a solution to all complaints of governmental agencies because, even though the construction manager may be the agency’s choice, the actual construction work had to be awarded to the lowest bidder through competitive bidding. In fact, construction management sometimes complicated the bidding process, particularly when the agency uses separate contracts awarded under several bid packages to specialty contractors (typically subcontractors on other jobs) who separately provide performance and payment bonds for their portion of the work. Public agencies still faced any difficulties inherent in awarding to the lowest bidder.

Under the new law, for projects in excess of $100,000 local agencies may award construction contracts using either the traditional public competitive bidding process (referred to in the new law as “Category A” procurement) or can apply a new “prequalification” process coupled with bidding by only selected contractors (referred to as “Category B” procurement).

The new law creates a uniform procedure for competitive bidding under the Category A procurement for most local government agencies. Two notices must be published, one at least two weeks before the bid opening date and one at least seven days before the bid opening date. Sealed bids are received and opened in public. The contract must be awarded to the “qualified bidder submitting the lowest responsible bid,” if it is awarded at all. The local agency may reject all bids. If the low bidder refuses to execute the contract, the agency may award the contract to the second lowest bidder. The new law does add some specific procedures for “protesting” of bids and adds new levels of administrative and court appeals.

Category B procurement uses essentially the same bidding procedure as Category A procurement but adds an initial step in the process in which interested bidders are screened and “prequalified” for bidding. The process starts with the publication of a notice soliciting interested contractors or subcontractors to submit a qualification statement. The government agency may consider the following factors in prequalifying contractor or subcontractors:

A. Demonstrated technical competence.

B. Experience constructing similar facilities.

C. Prior experience with the political subdivision.

D. Available non-financial resources, equipment and personnel as they relate to the subject property.

E. An overall performance history based upon the contractor’s or subcontractor’s entire body of work.

A request for qualification statements must identify the standards that will be evaluated in selecting qualified bidders. Agencies will probably simply use the foregoing factors, although it could add additional criteria or eliminate some. Agencies may also indicate how criteria will be weighed by evaluators for the particular project or projects to be offered for bid.

Perhaps the greatest uncertainty in the prequalification process is how agencies will apply any standards set for pre-selection of bidders. How will previous work for the agency weigh in the choice? Will agencies be free to disqualify a contractor based upon disagreements on a prior project? What if the disagreement on that prior project arose as a result of a poor set of plans? What about a prior controversy, or even litigation, between the contractor and the public entity in which the contractor prevailed? Can the agency place a substantial emphasis on favorable or unfavorable recommendations of its design professional? What about recommendations or the absence of recommendations from other owners of public or private projects constructed by the contractor?

A contractor not chosen is likely to contend that because it is properly licensed, is able to furnish a bond to assure its performances, and has successfully completed other similar projects, it should be allowed to bid for the project. The new law sets forth a procedure for objecting to the prequalification process. Objections must be submitted at least three days before the prequalification statements are due. After receiving qualifications submittals, the law provides that “political subdivisions may select licensed contractors that meet the prequalification standards.” While agencies appear to have broad discretion in selecting contractors, the agency is required to provide a written statement of the reasons for not selecting any contractor.

There is also a right of a contractor not selected to appeal the prequalification decision within seven days. The appeal first is presented to the governing board of the political subdivision. That governing board must also state its reasons for denying any contractor the right to bid if it affirms the decision. The non-qualified contractor may further appeal that decision to the Public Works Contractors License Board within fourteen days which must decide the appeal within thirty-five days of the date it is filed. The Public Works Contractors License Board “shall not substitute its judgment for that of the decision of the political subdivision” but is limited to deciding whether the local agency decision is consistent with the standards set to determine qualification of the bidders. Finally, there is the right to appeal an adverse decision by the Public Works Contractors License Board to the courts.

Appeals through the Public Works Contractors License Board level automatically stop the agency from proceeding with the bidding of the project. While not mandated, it seems quite possible that courts will also stay further bidding procedures while a court appeal is pending. This probably will mean that projects on which appeals are filed could be delayed several months or even years. For that reason alone, the use of prequalification procedures may be not very attractive to potential subdivisions facing the need to get project constructed timely.

Interestingly, the new law allows local agencies to prequalify “specialty contractors” as well as prime contractors. That may be appropriate for projects in which a construction manager is also chosen by the agency and the construction work is to be awarded to several pre-selected specialty contractors. Unanswered is whether agencies will be able to require prime contractors to subcontract only with prequalified specialty subcontractors. If so, government agencies could become entangled in issues regarding subcontract terms, subcontract defaults and other matters which have typically been left to private contracts rights. That could also lead to potentially strange results in bidding, particularly if prequalified subcontractors refused to bid to certain prequalified prime contractors or offer different prices to different prequalified prime contractors.

There are several other changes to the public works bidding statutes that are significant. The revisions will be effective as of July 1. If your company is actively involved in public works construction, it needs to follow public bidding issues closely.

Wayne V Meuleman is a partner with the law firm Meuleman Mollerup LLP, representing businesses with legal concerns involving contracts, real property matters, construction, commercial issues, and litigation. Mr. Meuleman can be reached at 208.342.6066 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it